American computer chip conglomerate Qualcomm has announced that it will drop its proposed $43 acquisition of Dutch competitor NXP, after the company was unable to gain approval from antitrust authorities in China. The ultimate deadline was midday Thursday in China, and Beijing’s Ministry of Commerce ran out the clock without approving the takeover.
As part of its purchase agreement, Qualcomm River Holdings will compensate NXP with a termination fee of $2 billion. Qualcomm also announced that it will go ahead with a stock buyback of up to $30 billion that it had promised shareholders if the NXP deal failed, and NXP likewise announced that it would purchase shares worth $5 billion.
The deal had been going back and forth for almost two years, with eight other jurisdictions such as the European Union and South Korea approving the deal. China was the sole holdout. China’s Commerce Ministry spokesman insisted that the broken deal had to do with antitrust laws, not U.S.-China trade concerns.
Steve Mollenkopf, CEO of Qualcomm Inc., commented in a press release, “Our core strategy of driving Qualcomm technologies into higher growth industries remains unchanged. We will continue to focus on our strong momentum in these growth industries with projected revenues of approximately $5 billion for fiscal year 2018, up greater than 70 percent from fiscal year 2016. We believe our technology leadership and disciplined execution will drive significant value creation for our stockholders.”
The Wall Street Journal reports that Mollenkopf sent a text to NXP Semiconductors Chief Executive Rick Clemmer on the evening of July 25, thanking him for working together.
“While it is unfortunate that the semiconductor powerhouse that would have resulted from the transaction with Qualcomm could not close after 21 months of diligent efforts by the team, we are confident in our future as an independent market leader and will continue to focus our efforts to drive our long-term strategy in our leadership markets of automotive and secure IoT solutions. Our strategic preparation has us more convinced about the opportunity from our key focus areas, which we will share more about at our upcoming Analyst Day in New York City,” said Clemmer in a press release.
The failed takeover comes in the midst of a growing U.S.-China trade war, sparked by tariff arguments between the two countries. Read more: https://www.cemag.us/blog/2018/07/us-china-tariff-spat-could-hit-semiconductor-electronics-industries-hard
President Donald Trump prevented a $117 billion takeover of Qualcomm by rival Broadcom back in March, with the excuse that it aid China in besting the U.S. in the development of 5G technology.
Wired noted that the terminated deal could be costly for Qualcomm, which had intended for the NXP takeover to lessen its dependence on licensing chip designs for smartphones.