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China OKs Qualcomm-NXP Merger, But Companies Have Moved On

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China OKs Qualcomm-NXP Merger, But Companies Have Moved On
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QUALCOMM, Inc. (NASDAQ: QCOM)'s wild 2018 continued this weekend after trade negotiations between the U.S. and China potentially opened up the possibility that a previously scrapped buyout of NXP Semiconductors NV (NASDAQ: NXPI) may be back on the table.

Qualcomm said the deal is dead, but China said it is no longer opposed to a union of the NXP and Qualcomm.

After a deal for Qualcomm itself to be acquired by Broadcom Inc (NASDAQ: AVGO) was blocked by the U.S. earlier this year on national security grounds, China subsequently stepped in and opposed Qualcomm’s $44-billion deal for NXP. Qualcomm eventually abandoned the NXP deal in July, paid a $2-billion termination fee to NXP and committed to an aggressive capital return program for shareholders.

After meeting with Chinese President Xi Jinping at the G20 summit over the weekend, President Donald Trump said China is now open to approving a merger between NXP and Qualcomm if the deal is renegotiated.

In a statement, Qualcomm said it has no intention of reviving the NXP deal.

“While we were grateful to learn of President Trump and President Xi’s comments about Qualcomm’s previously proposed acquisition of NXP, the deadline for that transaction has expired, which terminated the contemplated deal,” Qualcomm said in a statement.

Stifel analyst Tore Svanberg said Sunday that the news may help boost investor sentiment related to NXP stock in the near-term.

“While near-term investor sentiment may be positively biased due to the recent supportive commentary from the Chinese government regarding a renewed QCOM/NXPI deal should one materialize, we believe key fundamental risks remain,” the analyst said. 

Stifel has a Sell rating and $78 price target for NXP stock.

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Dec 2018SusquehannaInitiates Coverage OnNeutral
Nov 2018CitigroupMaintainsNeutralNeutral
Nov 2018BMO CapitalMaintainsMarket PerformMarket Perform

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