Qualcomm has increased the price and lowered the threshold for completing its takeover of NXP Semiconductors, over a year since first announcing the deal. The 16 percent increase in the bid price allowed the company to secure commitments from holders of 28 percent of NXP shares to back the bid.
Under the new offer, Qualcomm will pay USD 127.50 per share, up from USD 110 as first announced in October 2016. Since then the company has struggled to win over more than a few percent of NXP's shareholders, several of whom have complained the price was too low. Qualcomm said the increased bid reflects the strong annual results reported by NXP for 2017 and its good growth prospects.
Lower threshold
In addition to a higher bid, the company reduced the minimum tender condition to 70 percent of NXP shares from 80 percent. As of 08 February, only 1.5 percent of the shares had been tendered under the previous offer, which has been repeatedly extended.
Qualcomm said it had entered into binding agreements with nine NXP stockholders who collectively own more than 28 percent of NXP’s outstanding shares to tender their holdings at USD 127.50 per share. These include funds affiliated with Elliott Advisors and Soroban Capital Partners. Elliott had been one of the shareholders calling for a higher bid, of at least USD 135 per share, and the shareholder welcomed the new off in a statement.
The new offer for NXP increases the total price for Qualcomm by around USD 5.9 billion, from the initial bid of USD 47 billion including debt. Qualcomm said it will fund the extra cost from cash on hand and debt. The company reiterated its forecast for adjusted EPS of USD 6.75-7.50 for fiscal 2019, including a USD 1.50 contribution from NXP. The forecast for synergies from the merger remain USD 500 million within two years of closing.
Assuming shareholders accept the new offer, Qualcomm's last hurdle is to secure approval from Chinese authorities for the takeover, which it said it's confident will arrive in the near term. The companies have already obtained clearance in all other jurisdictions. The public bid remains open until 05 March.
Broadcom responds
Broadcom, which has mounted a hostile takeover bid for Qualcomm, said it was "evaluting its options" after the news about NXP. The company has been neutral on whether it considers NXP key to its bid for Qualcomm, saying it would continue with the offer even if Qualcomm terminated the takeover of NXP. If the NXP deal goes ahead, it could complicate further Broadcom obtaining regulatory clearance for a takeover of Qualcomm.
In a statement, Broadcom said the higher price for NXP is "well beyond what Qualcomm has repeatedly characterized as a 'full and fair' price". The company said it thought Qualcomm's board first should of discussed the move with Broadcom and the implications for its bid. "Broadcom believes the price increase demonstrates the Qualcomm board's disregard for its fiduciary duty to maximize value for Qualcomm stockholders," the company said.
