Qualcomm drops US$43b bid for chip rival on China rejection

US computer chip giant Qualcomm dropped a US$43 billion bid to acquire Dutch rival NXP yesterday after failing to win approval from antitrust authorities in China.

The world’s biggest smartphone-chip maker and Netherlands-based NXP confirmed in separate statements the deal, which would have been the biggest semiconductor takeover globally, had been terminated.

“Qualcomm River Holdings has terminated its previously announced cash tender offer to acquire all of the outstanding shares of NXP,” the company said, referring to a wholly owned subsidiary of Qualcomm.

Qualcomm said it would pay NXP a US$2 billion dollar break-up fee. Its board has also authorized a US$30 billion stock repurchase plan.

The California firm ended its effort when the bid expired yesterday.

China’s commerce ministry denied the China-US trade tensions affected the proposed merger.

“The issue with the case is related to anti-monopoly law enforcement and has nothing to do with China-US trade frictions,” commerce ministry spokesman Gao Feng told reporters, declining further comment.

Qualcomm had extended the deadline several times for the tie-up, which would have given the dominant smartphone chipmaker firm a broader array of products including sensors and microprocessors for connected “internet of things” devices.

It also raised its bid — from US$110 to US$127 a share — in February, to the irritation of fellow chipmaker Broadcom, which itself recently had a hostile bid for Qualcomm blocked by the White House.

Qualcomm needed approval from China because the country accounted for nearly two-thirds of its revenue last year.

“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,” Mollenkopf said in a statement with the company’s quarterly earnings.

“In addition, as previously indicated, upon termination of the agreement, we intend to pursue a stock repurchase program of up to US$30 billion to deliver significant value to our stockholders.”

Based in the Dutch town of Eindhoven, NXP is a leading maker of chips for the auto industry, as well as for contactless payment systems.

A former division of the Dutch electronics giant Philips, it became independent in 2006.

Qualcomm said profit rose 41 percent from a year ago to US$1.2 billion while revenues edged up four percent to US$5.6 billion.

The deal was announced in October 2016, just days before the election of US President Donald Trump.

“We believe ending the uncertainty of buying NXP is positive for Qualcomm shares,” Canaccord Genuity analyst Michael Walkley said in a note to clients, adding he expects strong earnings growth over the next several years thanks to the share buyback and that 5G will drive market share gains.