Qualcomm and NXP Semiconductors announced Thursday a definitive agreement, unanimously approved by the boards of directors of both companies, under which 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 $110.00 per share in cash, representing a total enterprise value of approximately $47 billion.
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.
Under the terms of the definitive agreement, a subsidiary of Qualcomm will commence a tender offer to acquire all of the issued and outstanding shares of NXP for $110.00 per share in cash.
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 strong 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 percent 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 percent of the outstanding ordinary shares of NXP. An extraordinary general meeting of NXP’s shareholders will be convened in connection with the offer to adopt, among other things, certain resolutions relating to the transaction.
The offer will be described in more detail in a tender offer statement on Schedule TO to be filed by a subsidiary of Qualcomm and a solicitation/recommendation statement on Schedule 14D-9 to be filed by NXP.
The transaction has substantial strategic and financial benefits apart from combining position in general purpose and automotive grade processing, security, automotive safety sensors and RF; enabling complete system solutions. The deal combines leading positions in general purpose and automotive grade processing, security, automotive safety sensors and RF; enabling more complete system solutions.
The combination of Qualcomm’s 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.
Both companies have demonstrated a strong commitment to technology with impressive product portfolios, focused investments in R&D. Qualcomm and NXP have both taken action to position themselves for profitable growth, while maintaining financial and operational discipline.
Qualcomm expects the transaction to be significantly accretive to non-GAAP EPS immediately upon close. Qualcomm expects to generate $500 million of annualized run-rate cost synergies within two years after the transaction closes. The transaction utilizes Qualcomm’s strong balance sheet and will be efficiently financed with offshore cash and new debt. The transaction structure allows tax efficient use of offshore cash flow and enables Qualcomm to reduce leverage rapidly.
“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. “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 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 microcontrollers,” said Rick Clemmer, NXP chief executive officer. “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.”
Goldman Sachs & Co. and Evercore served as financial advisors to Qualcomm and provided fairness opinions to the Qualcomm Board. Goldman Sachs & Co. and J.P. Morgan are providing committed debt financing for the transaction.
Centerview Partners LLC served as financial advisor and provided a fairness opinion to the Qualcomm Board. Paul, Weiss, Rifkind, Wharton & Garrison LLP; Cravath, Swaine & Moore LLP and Allen & Overy LLP served as legal counsel to Qualcomm. DLA Piper LLP (US) served as legal counsel to the Qualcomm Board.
Qatalyst Partners is acting as lead financial advisor to NXP, and Skadden, Arps, Slate, Meagher & Flom LLP and De Brauw Blackstone Westbroek are serving as legal counsel to NXP. Barclays and Credit Suisse are also acting as financial advisor to NXP.
