Qualcomm to buy NXP
Semiconductors for about $47 billion including debt
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[October 27, 2016]
(Reuters) -
Qualcomm
Inc said on Thursday it agreed to buy NXP Semiconductors NV for about
$47 billion, including debt, as it seeks to expand the reach of its
chips from phones to cars.
The deal would make Qualcomm, which supplies chips to Android smartphone
makers and Apple Inc <AAPL.O>, one of the biggest suppliers to the
fast-growing market of chips used by the automotive industry.
Qualcomm said it would offer $110 per share in cash, a premium of 11.5
percent to NXP Semiconductor's Wednesday's close.
The equity value of the deal is $37.88 billion, according to Reuters
calculations based on the company's 344.4 million diluted shares as of
Oct. 2.
Qualcomm intends to fund the transaction with cash on hand and new debt.
The company gets the bulk of its revenue from chip sales but most of its
profit comes from wireless patents it licenses to the mobile industry.
The transaction, which is expected to close by the end of 2017, is
structured to use offshore cash flow in a tax-efficient manner to
rapidly reduce leverage, Qualcomm said.
The company expects the deal to significantly add to adjusted earnings
immediately upon its close and generate $500 million of cost savings
annually within two years after the deal closes.
Qualcomm had sat out the transformative consolidation sweeping the
industry, which has seen mega-deals such as Avago buying Broadcom for
$37 billion last year.
NXP closed a nearly $12 billion deal to buy U.S.-based Freescale
Semiconductor last December, creating the world's top maker of
automotive electronics and doubling the percentage of its auto-related
revenue to 40 percent.
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The combined company is expected to have annual revenue of more than $30
billion, the companies said.
San Diego-based Qualcomm is facing slowing smartphone sales and stiff
competition from Chinese and Taiwanese rivals.
The
company is currently ranked third in terms of revenue among global semiconductor
companies in 2015, while Eindhoven-based NXP is ranked seventh, according to
research firm IHS.
Goldman Sachs and Evercore were financial advisers to Qualcomm while Centerview
Partners LLC advised its board.
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Qatalyst Partners, Barclays and Credit Suisse were financial advisers to NXP and
Skadden, Arps, Slate, Meagher & Flom LLP and De Brauw Blackstone Westbroek were
legal counsels.
NXP's shares rose 2.4 percent to $101, while Qualcomm shares were up nearly 2
percent to $69.50 in premarket trading.
(Reporting by Supantha Mukherjee and Narottam Medhora in Bengaluru; Editing by
Shounak Dasgupta)
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