Qualcomm raises offer for NXP Semiconductors

Key Points
  • U.S. chipmaker Qualcomm sweetened its offer to buy NXP Semiconductors to $127.50 per share from $110.
  • The bid was raised after the company was pressured by shareholders led by activist hedge fund Elliott Management.
  • Qualcomm agreed to buy NXP for about $38 billion more than a year ago, but some NXP shareholders resisted a sale seeking a better price.
Microprocessors sit on a circuit board displayed on the NXP Semiconductors NV pavilion at the Mobile World Congress in Barcelona, Spain, on Monday, March 2, 2015.
Simon Dawson | Bloomberg | Getty Images

U.S. chipmaker Qualcomm raised its offer to buy NXP Semiconductors to $127.50 per share on Tuesday, and said it has the backing of the shareholder group led by hedge fund Elliott Management that opposed its previous proposal.

The new deal puts pressure on fellow chipmaker Broadcom to decide if it will stick with a stipulation in its $121 billion bid for Qualcomm that the company not raise its previous $110 a share offer for NXP.

It also enables Qualcomm shareholders to better assess the standalone value of Qualcomm as they consider whether to back it in a shareholder vote on its fight with Broadcom on March 6.

"We will see what (Broadcom) does now," Bernstein analyst Stacy Rasgon said.

"While their current offer is 'premised' on NXP going at $110, they would of course not necessarily be precluded from making a new offer premised on the new NXP price."

Broadcom said on Tuesday it was evaluating its options and that the revised price for NXP was well beyond what Qualcomm has repeatedly characterized as a "full and fair."

The new offer comes less than a week after Broadcom and Qualcomm executives met face-to-face to discuss the differences between the two sides. Neither company responded to requests for comment on Tuesday's offer.

Proxy advisory firm Glass Lewis on Tuesday recommended Qualcomm shareholders vote for all six director nominees Broadcom has put forward. Last week, Institutional Shareholder Services had recommended four Broadcom nominees.

NXP's shares rose 6.2 percent to $125.80 on opening. The stock has traded above the original offer price for nearly seven months, reflecting expectations among investors that the offer would be raised.

Shares of Qualcomm were down more than 3 percent and those of Broadcom were up more than 2 percent in morning trading.

New terms

The buyout of NXP will help Qualcomm, which provides chips to Android smartphone makers and Apple, to expand in the fast-growing market for chips used in automobiles and reduce its dependence on a cooling smartphone market.

Under the new terms agreed with NXP's board, Qualcomm said it needs to buy a minimum 70 percent of NXP's outstanding shares in a tender offer, instead of the 80 percent required in the earlier agreement. The latest offer values NXP at $44 billion.

If Qualcomm does buy more than 70 percent in the tender offer, it can force the remaining shareholders to sell out without further negotiations.

San Diego-based Qualcomm agreed to buy Netherlands-based NXP for about $38 billion more than a year ago, but some NXP shareholders resisted a sale seeking a better price.

Qualcomm said on Tuesday it had entered into agreements with nine NXP stockholders, who collectively own more than 28 percent of NXP, including top shareholder Soroban Capital Partners LP and second-largest Elliott.

Activist hedge fund Elliott, which had resisted Qualcomm's previous $110 per share offer saying it undervalued NXP, said it was pleased that NXP's value had been recognized in the revised transaction terms.

Qualcomm has also extended its tender offer for NXP until March 5, a day before the shareholder meeting, when Broadcom's slate of directors will also go to a vote.

Qualcomm, which plans to fund the additional $6 billion with cash on hand and new debt, said approval from China's Ministry of Commerce is the only regulatory nod remaining for the closure of the NXP deal.