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In a consolidation of the semiconductor sector, as heavily rumoured, NXP Semiconductor has agreed to be acquired by Qualcomm. According to the pair, this will create the industry powerhouse to focus on Secure Connections for a Smarter World.
Qualcomm is offering $110 (€100.7) per share in cash, a premium of 11.5 per cent to NXP’s Wednesday’s close, valuing the deal at some $47 billion, including debt. 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 October 2nd.
Qualcomm intends to fund the transaction with cash on hand and new debt and expects the deal to add significantly to adjusted earnings immediately upon its close and generate $500 million of cost savings annually within two years after the deal closes.
NXP’s shares rose 2.4 per cent to $101, while Qualcomm shares were up nearly 2 per cent to $69.50 in premarket trading.
According to NXP, combining of NXP into Qualcomm is based on compelling strategic logic that brings together two highly successful and complementary businesses to create a premier semiconductor industry leader. With unique leadership positions in Wireless technologies, Security and Processing, the union is ideally positioned to address the emerging trends of ADAS and Autonomous Vehicles, the Internet of Things (IoT) and the 5G revolution.
The combined company is expected to have annual revenues of more than $30 billion, serviceable addressable markets of $138 billion in 2020 and leadership positions across mobile, automotive, IOT, security and networking segments. The transaction has substantial strategic and financial benefits:
o Complementary technology leadership in strategically important areas: The transaction combines Qualcomm’s leadership in low-power advanced computing, connectivity and communications systems with NXP’s complementary leadership in general purpose and automotive grade processing, security, automotive safety sensors and RF; enabling more complete system solutions.
o Mobile: A leader in mobile SoCs, 3G/4G/5G modems and security.
o Automotive: A leader in global automotive semiconductors, including ADAS, infotainment, safety systems, body & networking, powertrain & chassis and secure access.
o IoT and Security A leader in broad-based MCUs, secure identification, mobile transactions, payment cards and transit; strength in application processors and connectivity systems.
o Networking: A leader in network processors for wired and wireless communications and RF sub-segments, Wave-2 11ac/11ad, RF power and BTS systems.
o Enhanced go-to-market capabilities to serve our customers: The combination of Qualcomm and NXP’s deep customer and ecosystem relationships and distribution channels enables the ability to deliver leading products and platforms at scale in mobile, automotive, IoT, industrial, security and networking.
o Shared track record of innovation and commitment to operational discipline: Both companies have demonstrated a strong commitment to technology leadership and best-in-class product portfolios with focused investments in R&D. Qualcomm and NXP have both taken action to position themselves for profitable growth, while maintaining financial and operational discipline.
NXP says that Qualcomm is an exceptional company with a like-minded approach to that of NXP, in terms of customer-focused innovation. Its exceptional heritage, engineering execution capability and richness of technology are an ideal match to NXP’s long-standing commitment to the Automotive, Security, Networking, Consumer and Industrial markets.
The transaction is subject to regulatory approvals and other closing conditions and is likely close during the end of calendar 2017.