London/San Francisco: Qualcomm Inc. raised its offer for NXP Semiconductors NV and said it cut a deal with holders, in a bid to close a transaction that may be crucial to its own efforts to fend off a hostile approach by Broadcom Ltd.
The San Diego-based chipmaker raised its offer by 16% from $110 a share to $127.50 a share to an equity value of about $43 billion. That was enough to secure support from holders, including activist Elliott Management Corp., of about 28% of NXP’s stock, it said. That likely removes the opposition of a crucial block of shareholders who have piled into the stock demanding a higher price.
Qualcomm itself is the subject of what would be the largest takeover in the history of technology deals. Its suitor Broadcom said its $121 billion bid is contingent on the NXP deal going through at originally agreed price. Qualcomm has rejected Broadcom’s approaches provoking its would-be purchaser into nominating board members in a move aimed at appealing directly to its shareholders in a 6 March vote.
Qualcomm’s move may not end Broadcom’s attempt to purchase it though, according to Sanford C. Bernstein & Co. analyst Stacy Rasgon, who predicted the deal will go to the shareholder vote.
“We don’t think they toss it and walk though," he wrote in a note following the announcement. “We would hope for further engagement between the two companies, though their sit-down together last week does not appear to have been incredibly fruitful so we aren’t holding our breath."
NXP shares rose as much as 6.3% $126.39 in pre-market trading in New York. Qualcomm shares fell 2.9% to $62.83. Qualcomm also secured the agreement of NXP to the minimum threshold needed to win approval for its purchase to 70% of holders, the US company said in a statement Tuesday. It said the higher bid allowed it to reach binding agreements with nine investors who own 28% of NXP shares.
Qualcomm executives raised the offer price because the Dutch company’s earnings have improved ahead of expectations in the more than a year it’s taken the transaction to work its way through regulatory approval, according to the statement.
The deal, first announced in 2016, is aimed at jump-starting Qualcomm’s efforts to expand its industry-leading mobile phone technology into new markets such as automotive.
Elliott, which owns a 7.2% stake in NXP, had previously said it believed company’s standalone value was $135 a share. On Tuesday, the New York-based hedge fund said it had entered into an agreement to support the new transaction.
“Elliott believes that today’s announcement reflects a positive outcome for all NXP shareholders and is pleased that the company’s value has been recognized in the revised transaction terms," the hedge fund said in a statement.
Broadcom chief executive officer Hock Tan has said the takeover of NXP won’t solve Qualcomm’s problems, and he wants it to focus on what it’s good at.
Qualcomm, whose modem chips connect the majority of the world’s largest smartphones to cellular networks, said the deal for NXP has won approval from eight of nine required government regulatory bodies. Approval is still needed from China’s ministry of commerce. Qualcomm said it’s “optimistic" it will receive clearance in the “near term." Bloomberg