Qualcomm Fails to get Approval for $44 billion Takeover of Semiconductor Firm NXP
This past May we reported that Qualcomm intended to buy NXP, a Dutch Semiconductor rival for the sum of $44 billion dollars. The deal was massive in terms of scale and had passed eight of the nine mandatory approvals from countries that the firm does business in. China, where Qualcomm (NASDAQ:QCOM) does almost 65% of its business was the sole country to not approve of the deal.
The timing is definitely suspect as both the United States and China (well and the rest of the world) have dug-in and entrenched themselves in a brewing trade war. China could have nixed the deal due to the current trade climate.
Steve Mollenkopf is the CEO of Qualcomm and released this statement:
We intend to terminate our purchase agreement to acquire NXP when the agreement expires at the end of the day today, pending any new material developments
Qualcomm is now forced to fork over $2 billion dollars in a “break-up” fee that is a common clause in pending takeover purchase contracts. Now the company is pivoting to use up to $30 billion to repurchase stock to drive value for its stockholders.
Investors weren’t phased and were possibly pleased with the news as this coincided with very positive earnings from the company. Revenue (up 6% to $5.6B q-o-q) and earnings per share (up 60% year over year) were both up for the quarter stock prices surged at the opening bell, up over 6% to $63.54 at the closing bell. This recouped most of the losses from the last three months but is still shy of the year’s high of ~$68/share.