A lot has happened since Qualcomm announced its as-yet-unclosed $44bn acquisition of NXP Semiconductors in October 2016. The would-be buyer has successfully fended off an unwelcome suitor in what would have been the tech industry’s largest transaction. It has seen a former king at the company look to raise an army and reclaim the throne. Meanwhile, as Qualcomm’s deal has languished in limbo, more than 150 other chipmakers have been gobbled up, according to 451 Research’s M&A KnowledgeBase.
While those matters are mostly closed, Qualcomm’s bid for NXP remains open. At least it remains open for another day. The deadline for gaining the last remaining regulatory approval for the transaction is Wednesday night, just hours after it is scheduled to report fiscal third-quarter results.
Qualcomm and NXP have the green light from all of the necessary national and international bodies except one: China. Qualcomm extended its bid for NXP last April, when it refiled its application to China’s Ministry of Commerce. At the time, the company said it would walk away from the deal if it didn’t get approval on July 25 and pay a $2bn breakup fee to NXP the following day.
Right now, that appears likely to happen. Investors have put almost a 20% discount on NXP shares, compared with Qualcomm’s already raised offer of $127.50 in cash for each share of NXP. Over the past month, the discrepancy between the two prices has widened in almost every trading session. In mid-afternoon trading on Tuesday, NXP stock was changing hands at about $102.
Of course, that period has also seen a near continuous escalation in the trade war between the US and China. (We recently noted how tech acquisitions and investments have suffered pretty serious collateral damage in the ongoing spat between the two economic superpowers. China is currently on pace to purchase the fewest number of US tech providers since the country began shopping here about a half-decade ago, according to the M&A KnowledgeBase.)
Assuming Wall Street’s terminal view of the deal does indeed come to pass, what will happen to the two sides? For NXP, it’s pretty simple: deposit the $2bn termination fee into its treasury and go on with business. (It’s a pretty significant windfall for the company, which generated only $2.2bn in profit in all of last year.)
For Qualcomm, which would remain inexorably tied to the ever-maturing cellphone market, the options are a bit more limited. Nonetheless, one move we can probably rule out: Unlike Broadcom, the chipmaker that tried to buy Qualcomm, we don’t see the 33-year-old semiconductor provider announcing a multibillion-dollar purchase of a software vendor. Even two weeks on, Broadcom’s $19bn acquisition of CA Technologies is still a bit of a head-scratcher.