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Qualcomm plans to abandon NXP bid; China is silent as time runs out

Qualcomm plans to abandon NXP bid; China is silent as time runs out
Qualcomm intends to pay NXP a $2-billion breakup fee and plans to buy back $30 billion in stock if its deal to buy NXP is scrapped. (Yichuan Cao / TNS)

Qualcomm Inc. said it will abandon its $44-billion bid to acquire rival chipmaker NXP Semiconductors NV, barring last-minute antitrust clearance from China. That would end its 20-month attempt to complete the largest-ever deal in the semiconductor industry.

"We intend to terminate our purchase agreement to acquire NXP when the agreement expires at the end of the day today, pending any new material developments," Qualcomm Chief Executive Steve Mollenkopf said in a statement Wednesday.

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Under the terms of their agreement, San Diego-based Qualcomm has until 11:59 p.m. Eastern time to get a sign-off from Chinese regulators, who have delayed approval for months against the backdrop of rising trade tensions with the United States. Qualcomm intends to pay NXP a $2-billion breakup fee and plans to buy back $30 billion in stock if the purchase is scrapped.

The deal was unveiled in October 2016, and its collapse would be a blow to both companies. Qualcomm, the world’s biggest maker of mobile-phone chips, pitched the purchase of NXP as a way to jump-start a push into automotive silicon to reduce its reliance on the smartphone market, where it’s facing more competition and legal battles with customers. NXP’s management, after almost two years waiting for the deal to close, would have to find a way to convince customers and investors that it has a strong future as an independent company.

Shares of Netherlands-based NXP slid 2% to $96.50 in extended trading after Qualcomm’s statement. Qualcomm shares jumped about 5%. Qualcomm had been offering $127.50 a share for NXP, and the transaction was approved by both sets of shareholders and government agencies in Europe, the United States and elsewhere.

China has been the final jurisdiction holding up completion of the transaction. Qualcomm originally assured investors that approval would come by the end of 2017. In April, the two companies extended the agreement to Wednesday’s deadline as Qualcomm worked out concessions with China. But the sign-off has dragged on into an escalating war of words and cross-border tariffs, with President Trump accusing China of creating an unfair imbalance in trade between the world’s two largest economies.

Chinese regulatory authorities — in the form of the State Administration for Market Regulation — had been set to approve the acquisition, people familiar with the process have said in recent months. But as the trade dispute continued, one particular sticking point was ZTE Corp., the Chinese telecommunications-equipment maker that had been in danger of failing because of a seven-year U.S. ban on selling components to the company. After the personal intervention of Trump, the ZTE ban was lifted — something that had been seen as a prerequisite to Chinese approval of the Qualcomm-NXP deal.

The ultimate failure of the deal, one that had been mutually agreed upon by two companies that had little or no product overlap, probably would cast a further pall over the prospects for other transactions in the $400-billion semiconductor industry, which has been reshaped by combinations over the last three years. Qualcomm itself was recently the subject of a hostile takeover bid by Broadcom Inc. Broadcom’s effort looked poised to succeed until the U.S. government blocked it, citing risks to national security.

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