Qualcomm increases offer for NXP, cuts deal with holders

[LONDON] Qualcomm raised its offer for NXP Semiconductors 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.

The San Diego-based chipmaker raised its offer by 16 per cent from US$110 a share to US$127.50 a share to an equity value of about US$43 billion. That was enough to secure support from holders, including activist Elliott Management, of about 28 per cent 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 US$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 March 6 vote.

NXP shares rose as much as 6.3 per cent US$126.39 in pre-market trading in New York. Qualcomm shares fell 2.9 per cent to US$62.83. Qualcomm also secured the agreement of NXP to the minimum threshold needed to win approval for its purchase to 70 per cent 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 percent 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. 

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