Qualcomm Plans to Abandon NXP Deal -- 2nd Update
25 Luglio 2018 - 11:05PM
Dow Jones News
By Eliot Brown and Bob Davis
Qualcomm Inc. said it plans to scrap its $44 billion purchase of
Dutch chip maker NXP Semiconductors NV on Wednesday after failing
to secure approval in China, making the deal one of the most
prominent victims of spiraling U.S.-China trade tensions and
derailing a central part of the U.S. chip giant's strategy.
China was the last of nine markets that needed to approve the
deal, which would have been among the biggest ever between
technology companies. The acquisition was announced in October 2016
and extended in April as the chip makers sought approval from
China's competition regulators.
Instead, the deal became mired in Beijing's trade fight with
Washington. Qualcomm said Wednesday it won't again extend the
agreement, which expires just shy of midnight ET, though it said
its decision was pending any new material developments.
Qualcomm's decision to walk follows a round of last-minute
lobbying on the company's behalf by senior U.S. officials including
Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur
Ross, who tried to persuade their Chinese counterparts to separate
the deal's approval process from broader trade tensions, U.S.
industry executives said.
The deal's demise puts a leading U.S. technology company atop a
list of those affected by the trade battle, which has produced
tit-for-tat tariffs by the U.S. and China on billions of dollars of
goods across a range of industries.
"It's not just a trade war anymore," said Eswar Prasad, a
Cornell University economist who worked in China while at the
International Monetary Fund. "It's becoming a more open economic
conflict between the two countries."
The deal's collapse, he said, "certainly is a strong signal that
China is going to use every available lever."
The Chinese embassy didn't immediately respond to a request for
comment. Chinese officials previously have said the deal presented
potentially negative issues that were difficult to resolve.
Qualcomm said it plans to spend up to $30 billion buying its own
stock to placate shareholders. The collapse of the planned merger
also requires the San Diego chip maker to pay a $2 billion
termination fee to NXP, based on their renewed agreement in
April.
The deal's collapse, which came as Qualcomm reported profit
jumped 41% in its latest quarter on a 4% gain in revenue, caps a
remarkable period of tumult for the company, the world's top
producer of communications chips used in smartphones and other
gear.
Just four months ago, the Trump administration intervened to
save Qualcomm from a $117 billion hostile takeover by Broadcom Ltd.
on the grounds that Qualcomm's technology was vital to U.S.
national security. Qualcomm is a U.S. leader in the development of
so-called fifth-generation, or 5G, cellular technology that will
help connect a slew of new devices to wireless networks, and the
White House's intervention effectively designated Qualcomm a
national champion essential to battling China's rising might in
5G.
Qualcomm had billed the NXP deal, announced 12 days before
Donald Trump was elected president, as transformational, expanding
its reach beyond smartphones into areas such as automobiles and
smart-home devices. The deal would have added a company with $9.26
billion in revenue last year and some 30,000 employees to Qualcomm,
which had $22.29 billion in sales in its latest fiscal year and a
similar number of employees.
Originally expected to close by the end of last year, the NXP
deal was approved by eight other regulatory bodies, including in
the U.S. and Europe. But it dragged with China's antitrust
authority, which has broad reach to claim say over deals in which
at least one party has a significant presence in the Chinese
market.
As the deal languished, trade tensions between the U.S. and
China escalated from bellicose rhetoric to tariffs by each side
that are aimed at $50 billion of imports from the other. Mr. Trump
has threatened to put tariffs on all $505 billion of Chinese
imports into the U.S.
With the clock ticking down to Wednesday's expiration, Mr.
Mnuchin spoke with Chinese Vice Minister Liu He to push for
approval, and Mr. Ross did the same with China's ambassador to the
U.S., Cui Tiankai, according to the U.S. industry executives. The
U.S. officials argued the Qualcomm decision should be made on the
merits of the deal.
Spokesmen for the Treasury and Commerce departments declined
Tuesday to discuss the U.S. government's efforts.
--Yoko Kubota contributed to this article.
Write to Eliot Brown at eliot.brown@wsj.com and Bob Davis at
bob.davis@wsj.com
(END) Dow Jones Newswires
July 25, 2018 16:50 ET (20:50 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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