This really seems to be the season for acquisitions. Along the same stream, Qualcomm is seriously ramping up its capabilities with a new acquisition. Qualcomm’s NXP acquisition, which according to rumors, is expected to cost the chip maker up to a staggering $47 Billion, is also expected to significantly ramp up it’s capabilities in new and emerging sectors.
We talked about the possibility a week ago and Qualcomm has confirmed it today. The acquisition is the biggest chip deal ever. While NXP carries a market cap of around $34 Billion, sources said that Qualcomm is ready to pay $110 per share. That amount would make the total price of the deal, a significant cut above $34 Billion. While Qualcomm will be paying $38.5 Billion for the acquisition, the assumption of NXP’s debts will take the total price of the deal around $ 47 Billion.
The company said that it is ready to pay an almost unprecedented premium of over 11 percent for NXP and interestingly enough, it does not take a genius to figure out why.
Qualcomm is well known as a chip manufacturer. However, most of the company’s focus has been upon smartphones and the sort. On the other hand, NXP has moved its focus to smart cars, connected homes and the Internet of things and indeed, has a sizable head-start over its competitors.
NXP in its current form, is itself is the production of an acquisition. The company was part of a $12 billion deal which saw it acquire U.S.-based Freescale Semiconductor last year. This made NXP, the top supplier of automotive electronics. Since the acquisition, NXP has doubled down on R&D and has also started generating greater revenues. In short, it is the perfect company for someone looking to more into Internet of things, connected cars and other, similar sectors.
Qualcomm’s NXP acquisition can thus be looked at from a future based, strategic point of view. We already know that the company has professed its love for IOT multiple times in the past and believes it to be the future. According to Qualcomm and many others of its creed, IOT will likely be what the invention of computer and Internet was for the past couple of decades. By bringing NXP into its fold, Qualcomm is getting itself to a position where any manufacturer looking to create something substantial in IOT, will be forced to come knocking at its doors.
While Qualcomm is ranked third in the list of world’s largest semiconductor companies on the basis of revenue, NXP is ranked a few spots further down at seventh. Together, the companies will have a joint revenue of over $30 Billion and are very likely to jump up a spot. Meanwhile, Goldman Sachs and Evercore were the advisors assisting in Qualcomm’s NXP acquisition.
Commenting on the topic, Richard L. Clemmer, NXP Chief Executive, said:
United in a common strategy, the complementary nature of our technologies and the scale of our portfolios will give us the ability to drive an accelerated level of innovation and value for the whole ecosystem.
Meanwhile, Qualcomm’s shares rose by almost 2.9% to stand at $70.20, while NXP’s stocks received a boost of 2.1% to reach $100.72 in pre-market trading.
Qualcomm’s NXP acquisition is expected to close by the end of 2017.