Qualcomm has agreed to buy NXP Semiconductors for USD 47 billion including debt, strengthening its position in the wireless market and creating a new growth market in automotive. Qualcomm will pay USD 110 per share in cash for NXP, a premium of over 30 percent compared to NXP's share price a month ago when reports of a possible takeover first emerged.
The combined company, which also includes Freescale acquired by NXP last year, is expected to have annual revenues of more than USD 30 billion and leadership positions across mobile, automotive, IoT, security, RF and networking. Qualcomm expects to realise USD 500 million in annual cost savings within two years of closing the deal, and NXP also should add immediately to adjusted earnings.
Qualcomm will use some of its cash accumulated overseas as well as USD 11 billion in debt to finance the acquisition and said it aims to maintain its credit ratings and leverage after the deal. The company said the strong cash profile of the new combination will also support growth in its dividends and shareholder remuneration.
The takeover is expected to close by the end of calendar 2017, pending regulatory approvals. It's conditional on 95 percent of Netherlands-based NXP's shareholders accepting the bid, or 80 percent if a proposed asset sale is also included in the deal.
The acquisition sees Qualcomm enter the multi-billion-dollar consolidation of the semiconductor market underway in the past two years. To date it has focused on smaller acquisitions, such as CSR last year, but the company has been under pressure from shareholders to rethink its strategy of relying on the mobile market and licensing. Whereas Qualcomm last year said it would narrow its focus, the takeover of NXP is expected to expand its addressable market by over a third in the next five years, while reducing the share of mobile in total revenues to less than half.
