Qualcomm Incorporated and NXP Semiconductors (Netherlands) announced a definitive agreement, unanimously approved by the boards of directors of both companies: Qualcomm will acquire NXP.
Pursuant to the agreement, a subsidiary of Qualcomm will commence a tender offer to acquire all of the issued and outstanding common shares of NXP for $110 per share in cash, representing a total enterprise value of approximately $47 billion.
NXP is a leader in high-performance, mixed-signal semiconductor electronics, with CAN products and solutions and automotive, broad-based micro-controllers, secure identification, network processing, and RF power. As a semiconductor solutions supplier to the automotive industry, NXP also offers automotive infotainment, networking, and safety systems, with solutions designed into 14 of the top 15 infotainment customers in 2016. NXP has a broad customer base, serving more than 25 000 customers through its direct sales channel and global network of distribution channel partners.
The automotive semiconductor market includes CAN transceiver and CAN controller ICs. Far more than 1,5 billion CAN nodes were installed in 2015 according to information from different chipmakers. In the last months, several mergers and acquisitions led to changes in the ranking list of automotive semiconductor manufacturers. After the acquisition of Freescale, NXP was on the top with a market share of 14,3 %. NXP is the market-leading manufacturer of CAN transceiver chips with a market-share of more than 50 %.
"With innovation and invention at our core, Qualcomm has played a critical role in driving the evolution of the mobile industry. The NXP acquisition accelerates our strategy to extend our leading mobile technology into robust new opportunities, where we will be well positioned to lead by delivering integrated semiconductor solutions at scale," said Steve Mollenkopf, CEO of Qualcomm Incorporated. "By joining Qualcomm's leading SoC capabilities and technology roadmap with NXP's leading industry sales channels and positions in automotive, security and IoT, we will be even better positioned to empower customers and consumers to realize all the benefits of the intelligently connected world."
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, RF, and networking. Mollenkopf continued, "We have taken significant action to build a foundation for profitable growth and the acquisition of NXP is strongly aligned with our strategy. Our companies both have substantial expertise in delivering industry-leading solutions to our global customers, built upon a shared commitment to technology innovation, focused R&D investments and strong financial and operational discipline."
"The combination of Qualcomm and NXP will bring together all technologies required to realize our vision of secure connections for the smarter world, combining advanced computing and ubiquitous connectivity with security and high performance mixed-signal solutions including micro-controllers. Jointly we will be able to provide more complete solutions which will allow us to further enhance our leadership positions, and expand the already strong partnerships with our broad customer base, especially in automotive, consumer and industrial IoT and device level security," said Rick Clemmer, NXP Chief Executive Officer.
"United in a common strategy, the complementary nature of our technologies and the scale of our portfolios will give us the ability to drive an accelerated level of innovation and value for the whole ecosystem. Such a strong fit will bring opportunities for our employees and customers, as well as provide immediate attractive value for our shareholders, in creating the semiconductor industry powerhouse."
Qualcomm intends to fund the transaction with cash on hand and new debt. The transaction is structured to enable tax efficient use of offshore cash flow to rapidly reduce leverage. Qualcomm is committed to maintaining its investment-grade credit ratings. The solid combined cash flow profile will support Qualcomm's current dividend and dividend growth. Qualcomm is committed to anti-dilutive repurchases of its common stock as it de-levers its balance sheet to pre-transaction leverage levels. The pro forma cash flow profile provides a strong foundation for long-term capital returns to stockholders.
The tender offer is not subject to any financing condition. The transaction is expected to close by the end of calendar 2017 and is subject to receipt of regulatory approvals in various jurisdictions and other closing conditions. The tender offer is conditioned on the tender of at least 95 % of the outstanding ordinary shares of NXP or, if NXP shareholders approve the asset sale contemplated in the purchase agreement, the tender of at least 80 % of the outstanding ordinary shares of NXP.
Qualcomm is a world leader in 3G, 4G and next-generation wireless technologies. Qualcomm Incorporated includes Qualcomm's licensing business, QTL, and the majority of its patent portfolio. Qualcomm Technologies, a subsidiary of Qualcomm Incorporated, operates, along with its subsidiaries, substantially all of Qualcomm's engineering, research and development functions, and substantially all of its products and services businesses, including its semiconductor business. The company also offers CAN products.
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