Qualcomm plans to drop NXP bid; China silent as time runs out

Qualcomm Inc. said it will abandon its $44-billion bid to acquire rival chip maker NXP Semiconductors, barring last-minute antitrust clearance from China. That would end its 20-month attempt to complete the largest-ever deal in the semiconductor industry.

“We intend to terminate our purchase agreement to acquire NXP when the agreement expires at the end of the day today, pending any new material developments,” Qualcomm Chief Executive Steve Mollenkopf said in a statement Wednesday.

Under the terms of their agreement, San Diegobased Qualcomm had until 11:59 p.m. Eastern time to get a sign-off from Chinese regulators, who have delayed approval for months against the backdrop of rising trade tension with the United States. Qualcomm intends to pay NXP a $2-billion breakup fee and plans to buy back $30 billion in stock if the purchase is scrapped.

The deal was unveiled in October 2016, and its collapse would be a blow to both companies. Qualcomm, the world’s biggest maker of cellphone chips, pitched the purchase of NXP as a way to jump-start a push into automotive silicon to reduce its reliance on the smartphone market, where it’s facing more competition and legal battles with customers. NXP’s management, after almost two years waiting for the deal to close, would have to find a way to convince customers and investors that it has a strong future as an independent company.

Shares of Netherlandsbased NXP slid 2% to $96.50 in extended trading after Qualcomm’s statement. Qualcomm shares jumped about 5%. Qualcomm had been offering $127.50 a share for NXP, and the transaction was approved by both sets of shareholders and government agencies in Europe, the United States and elsewhere.

China has been the final jurisdiction holding up completion of the transaction. Qualcomm originally assured investors that approval would come by the end of 2017. In April, the two companies extended the agreement to Wednesday’s deadline as Qualcomm worked out concessions with China. But the sign-off has dragged on into an escalating war of words and cross-border tariffs, with President Trump accusing China of creating an unfair imbalance in trade between the world’s two largest economies.

Chinese regulatory authorities had been set to approve the deal, people familiar with the process have said in recent months. But as the trade dispute continued, one particular sticking point was ZTE Corp., the Chinese telecommunications equipment maker that had been in danger of failing because of a seven-year U.S. ban on selling components to the company. After the personal intervention of Trump, the ZTE ban was lifted — something that had been seen as a prerequisite to Chinese approval of the Qualcomm-NXP deal.

The ultimate failure of the deal probably would cast a further pall over the prospects for other transactions in the semiconductor industry.