Shares of NXP Semiconductors (NXPI 3.79%) fell 37.4% in 2018, according to data from S&P Global Market Intelligence. There's no mystery to explore here: NXP's proposed merger with larger rival Qualcomm (QCOM 4.17%) was canceled after nearly two years of negotiations and regulatory concessions. Investors in the embedded-chip maker didn't like that outcome at all.
The original $38 billion buyout offer was launched in October 2016, but stalled for more than a year amid close scrutiny by regulators on three continents. Raised to $44 billion in early 2018 in order to keep NXP's largest shareholders on board, the merger still lacked a crucial final stamp of approval from Chinese regulators. Qualcomm and NXP refiled the application for the deal, but finally ran out of patience and time. On July 26, Qualcomm threw in the towel and sent a $2 billion breakup-fee payment to NXP. Try as they might, NXP and Qualcomm will not move forward as a single company.
This deal was probably a direct victim of trade tensions between Chinese and American leaders. Qualcomm will have to struggle on without NXP's automotive computing solutions and IoT (Internet of Things)-ready security and networking chips, which would have provided a dramatic boost to the larger company's portfolio in these key high-growth areas.
As for NXP, the company quickly repurchased 14% of its own shares and got back to the same business it has been running for years -- focused directly on some of the most exciting growth markets in the tech sector today. The stock now trades at 47% below Qualcomm's proposed acquisition prices, but hasn't lost any of the business prospects that inspired the buyout proposal in the first place. I bought some shares of NXP in August to take advantage of these downright silly share prices. Since then the discount has only grown larger, for all the wrong reasons.
Check out the latest NXP Semiconductors earnings call transcript.