Dutch chipmaker NXP 'disappointed' by collapse of $44bn Qualcomm deal

Qualcomm
Qualcomm pulled out of the $44bn deal Credit: AP

Dutch semiconductor company NXP insisted it could go it alone yesterday after Chinese regulators refused to approve a $44 billion takeover by its US rival Qualcomm, triggering the deal's collapse.

NXP chief executive Rick Clemmer fought to allay investor fears after the deal, which was first announced in 2016, unraveled.

“It is an understatement to say we are all disappointed,” he said. “But we do not believe there is any value to dwell on what could have been.”

On Wednesday, Qualcomm, which makes mobile phone processors, dropped a $44bn (£33.5bn) takeover of NXP after regulators in China held up the deal for two years.

Many observers interpreted China's refusal to wave through the deal, which had been approved by eight other governments, as a consequence of the Trump administration's aggressive stance on tariffs and trade.

As the deadline for regulatory approval of the deal elapsed at midnight New York time on Wednesday, San Diego-based Qualcomm confirmed it was pulling out.

US-listed NXP, which makes the chips used in smartphones and cars reported revenues of $2.19bn for the three months to July, 5pc up compared to the previous year. NXP shares were down 5pc in early trading.

The collapse of the deal comes at a period of tense trade relations between China and the US. The deal had been awaiting Chinese approval for months as the US administration slapped trade tariffs on China.

NXP had to gain regulatory approval for the deal in China as the country provides more than two-thirds of its revenues.

Mr Clemmer said: “It was a quite unfair process that we just went through with China… I don’t think you will see us doing any huge transactions.”

He added: “I think you have to give us a little bit of time to get through the overhang. We and Qualcomm were both working diligently through midnight last night to try and close the transaction.”

Eindhoven-based NXP has, in fact, been hit twice by the growing spat between Washington and China. The company is a supplier to ZTE, a Chinese telecoms company that was hit with a sales ban and a $1bn fine by US regulators for breaking sanctions on Iran and North Korea.

NXP
Credit: Reuters

Executives said the company had seen a “pause” around the deal with Qualcomm and that its growth had been hit by “deal fatigue” as the company’s 30,000 employees prepared for integration. The company announced a $5bn share buyback programme for investors.

The unravelling of the much-delayed deal could also hit Qualcomm, which said it will have to pay a $2bn break fee.

However, investors in Qualcomm have responded favourably to the deal’s termination. Shares in Qualcomm were up 6.5pc in after hours trading.

Qualcomm chief executive Steve Mollenkopf said on Wednesday: “We believe our technology leadership and disciplined execution will drive significant value creation for our stockholders."

But Qualcomm’s failed effort to takeover NXP comes amid a web of dealmaking in the semiconductor space. China was recently offered an olive branch from Mr Trump, who stepped in to limit US sanctions on China’s ZTE.

The deal is the second tech megadeal to collapse this year, after US President Donald Trump buried a $117bn attempted takeover of Qualcomm by Singapore’s Broadcom. While Qualcomm shareholders had approved the deal, Mr Trump put an end to the deal at the last minute in an effort to keep the US company free of overseas ownership.

Mr Trump had said that the Broadcom deal for Qualcomm could present a national security risk to the US.

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