Qualcomm Not Considering NXP Acquisition Anymore

This is not investment advice. The author has no position in any of the stocks mentioned. WCCF TECH INC has a disclosure and ethics policy.

In talks over the weekend at the G20 summit, Chinese President Xi Jinping said his administration would revisit the antitrust matter of Qualcomm buying NXP if it were presented again.


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The Qualcomm-NXP Purchase

On October 27 2016, Qualcomm Technologies Inc. (NASDAQ:QCOM) agreed to purchase NXP Semiconductors (NASDAQ:NXPI) for $38 billion, or $110 per share. During the months that followed it proved to be difficult to get shareholder backing so Qualcomm was forced to increase their bid to $128 per share for NXP, for a total value of $44 billion pending regulatory approval. This deal was so important to Qualcomm that in their 2017 Annual Report, the approval of the deal was the first risk listed before revenue decline from licenses and increased competition. Risk factors in their 2018 Annual Report are mainly centered around adverse rulings on regulatory matters and license and patent royalty disputes for comparison.

The deal which started in October 2016 fell apart in July 2018 when the government of China did not approve the merger. Qualcomm has a large presence in China so they were not left with any real options except to cancel the deal. NXP CEO Richard Clemmer at the time said the lack of approval in China was a political decision and not a regulatory one. He then went on to say that “Uncertainty will keep us from doing such a deal in the near future”. Qualcomm used share buybacks of $5 billion to try to maintain its stock price for their shareholders after the deal was cancelled.


US/China Relations and a Trade War     

We have reported extensively on the US/China trade war escalations and how it affects consumers in the tech industry with the most recent update this weekend. The targeting of individual industries such as agriculture or consumer electronics is a fairly simple tool used that has far-reaching consequences to these large economies. There is currently 90-day halt to tariff impositions, and it will take concessions on both sides and complex new legislation to dial back from the last years’ worth of escalations.


The future for Qualcomm/NXP

Qualcomm has stated publicly that they have moved on from the deal and already paid NXP the $2 billion cancellation fee from their original agreement. This acquisition could be seen as an example for other companies who intend to make multinational deals in the current uncertain environment. In the past the European Union and Federal Trade Commission of the United States had opposed large corporate mergers for monopoly reasons, however, the Chinese government didn’t publicly say they opposed the deal or give any insight into the matter, they just did not approve it by the original deadline, which was essentially the same thing.