Qualcomm buys NXP for $47bn to expand business
Move to cut dependence on phones
QUALCOMM, the largest maker of cellphone chips, will acquire NXP Semiconductors in a transaction valued at $47 billion (R648.75bn), aiming to speed an expansion into new industries and reduce its dependence on the smartphone market.
San Diego-based Qualcomm agreed to pay $110 a share in cash for NXP, the biggest supplier of chips used in the automotive industry, or 11 percent more than Wednesday’s close, the companies said yesterday. The deal will be funded with cash on hand and new debt.
Chief executive Steve Mollenkopf is betting the deal, the largest in the chip industry’s history, will accelerate his company’s entry into the burgeoning market for electronics in cars. Eindhoven, Netherlands-based NXP is strong in that sector following its acquisition last year of Freescale Semiconductor.
“It’s no secret that we’ve been looking around,” he said. ”If you look at our growth strategy it’s to grow into adjacent markets at the time that they are being disrupted by the technology of mobile.”
The purchase is Qualcomm’s response to slowing growth in demand for smartphones, which provide the bulk of the company’s revenue. The two companies, which will have combined revenue of more than $30 bn, will have products that are capable of winning sales in markets worth $138bn by 2020, Qualcomm predicts.
The equity value of the transaction is $38.5bn. Including debt, the enterprise value goes up to $47bn, according to chief financial officer George Davis. The acquisition would add $11bn of debt to Qualcomm’s balance sheet, which it would be able to rapidly improve by using the overseas cash it generated to pay down, Davis said. – Bloomberg