China’s Inaction Ends the Qualcomm-NXP Deal as Deadline Passes
Qualcomm lost its chance to own NXP Semiconductors as China did not approve of the deal before the deadline on Thursday midday Beijing time.
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San Diego-based chip giant had been holding its breath for nearly two years, hoping to clear global regulatory hurdles for the purchase of the Dutch chip maker NXP Semiconductors NV. Struck in 2016, the deal had been approved by regulators in eight other jurisdictions, including the European Union and South Korea, with China as the only holdout.
China’s Ministry of Commerce did not grant approval by the final deadline for the agreement, signaling the termination of the $44-billion merger deal that otherwise would have made history. In the past two years since the deal was first announced, Qualcomm had extended the deadline several times but said earlier Wednesday that it would not extend the deadline again.
Given the ever-escalating U.S.-China trade battle, Qualcomm warned investors that China would likely choose the stance of inaction. “Continued uncertainty overhanging such a large acquisition introduces heightened risk,” said Steve Mollenkopf, CEO of Qualcomm, “We weigh that risk against the likelihood of a change in the current geopolitical environment, which we didn’t believe was a high probability outcome in the near future.”
“The decision for us to move forward without NXP was a difficult one,” Mollenkopf added.
Qualcomm said it would pay NXP a $2 billion “breakup fee,” as stipulated in the agreement while NXP said it would buy back $5 billion worth of shares.