Qualcomm-NXP Merger Gains Optimism
Qualcomm-NXP Merger Deal Almost Sealed
NXP grew its prominence in the automotive sector when it purchased Freescale at a whooping $12 billion in 2015. In the following year, Qualcomm Inc offered to acquire NXP at $38 billion, a figure that the company later increased to $44 billion. The deal was approved by antitrust regulators in the US and Europe, but went into shelve when the Ministry For Commerce in China refused to approve it.
Geographical politics and tensions in trade have frustrated companies’ operations in the past. U.S and China have had a rather cold relationship lately, a situation that was escalated when U.S banned its companies from supplying chips and components to ZTE. The move has paralysed the Chinese tech giant which was fully dependent on U.S companies like Qualcomm for the supply of its components. More positivity, fortunately, has shown in the previous week when President Trump openly expressed his desire to “bring ZTE back into business”. It is a thing that will improve trade relations between the two superpowers.
The recent developments shed more light on Qualcomm’s future. If its merger review with NXP is approved by the Chinese antitrust regulators, the company will increase its operations by diversifying into the automotive sector. Qualcomm might simply produce autonomous cars in future! A Beijing official told The Wall Street Journal that the deal looks more optimistic now, a factor that has seen NXP shares shoot up. The regulators in China must be probably responding to the US recent moves towards healthy relations in trade. The sitting POTUS was specific in his that his government’s ban on selling components to ZTE had led to many Chinese jobs lost. Talks between the two countries are expected in Washington later this week.
Qualcomm’s offer to is supposed to end this coming Friday, 25th May. The contract may most likely be extended again considering the factors we have on the table. This week, amidst the uncertainty, the company offered to repurchase a debt it had given to finance the acquisition. Qualcomm argues that it has done so in fulfilment of the provisions of the contents in the original offer. With the recent improvement in relations between China and U.S.A the deal is almost certain to see the light of the day. On May 14 the antitrust regulators started their review of Qualcomm’s application to buy NXP. It will be a big win and an add to the current levels of technology. Let’s keep waiting!