Qualcomm to Pay $47B for NXP, Lists Rationale for Semi’s Largest Deal

Qualcomm Inc. has confirmed speculations it will pay $47 billion for NXP Semiconductor N.V. and listed a range of reasons for what is shaping up as the largest M&A transaction in the history of the semiconductor industry and one expected to face significant integration challenges and pile a load of debts on the buyer.

The transaction will result in the creation of what analysts at Mizuho Securities termed the world’s “first end-to-end semiconductor auto supplier of the future,” with interests in a range of OEM markets, including automotive, where it will be the world’s No. 1 supplier, IoT, security, RF and networking, according Qualcomm. Additionally, the combined enterprise would have more than $30 billion in annual revenue and will focus on seeking opportunities in a market with potential sales of approximately $138 billion, the company said.

Steve Mollenkopf, CEO, Qualcomm Inc.

“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 Inc., in a statement. “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.”

Qualcomm spelled out the benefits it expects to gain from the transaction, which once concluded would dwarf the industry’s largest deals, including Avago’s $37 billion purchase of Broadcom and the $30 billion SoftBank paid for ARM Holdings Plc. The company said it will pay $110 per share in cash for NXP and said it would be financed through money currently held overseas and loans from two investment firms. The $47 billion value includes debts from NXP that Qualcomm will take over.

“We have taken significant action to build a foundation for profitable growth and the acquisition of NXP is strongly aligned with our strategy,” Mollenkopf added. “Our companies both have substantial expertise in delivering industry-leading solutions to our global customers, built upon a shared commitment to technology innovation, focused R&D investments and strong financial and operational discipline.”

In the statement, Qualcomm further explained what it expects to glean from the investment.

Complementary technology leadership in strategically important areas: The transaction combines leadership in general purpose and automotive grade processing, security, automotive safety sensors and RF; enabling more complete system solutions.
- Mobile: A leader in mobile SoCs, 3G/4G modems and security.
- Automotive: A leader in global automotive semiconductors, including ADAS, infotainment, safety systems, body and networking, powertrain and chassis, secure access, telematics and connectivity.
- IoT and Security: A leader in broad-based microcontrollers, secure identification, mobile transactions, payment cards and transit; strength in application processors and connectivity systems.
- Networking: A leader in network processors for wired and wireless communications and RF sub-segments, Wave-2 11ac/11ad, RF power and BTS systems.
Enhanced go-to-market capabilities to serve our customers: 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.
Shared track record of innovation and commitment to operational discipline: Both companies have demonstrated a strong commitment to technology leadership and best-in-class product portfolios with 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 said it expects to secure $500 million in “annualized run-rate cost synergies within two years after the transaction closes,” and that it would enable the company use “strong balance sheet and … allows tax efficient use of offshore cash flow and enables Qualcomm to reduce leverage rapidly.”

The companies said they expect the deal to close by the end of 2017, subject to regulatory approvals.