"If you don't drive your business, you will be driven out of business."
-B.C. Forbes
October 27,2016
Qualcomm to Acquire NXP Semiconductors
Financial Information*
- Enterprise Value $45.1 Billion
- EV/LTM Revenue 5.8x
- EV/LTM EBITDA 22.2x
Transaction Facts
- Chip designer Qualcomm Inc. (Nasdaq: QCOM) announced today that it agreed to buy NXP Semiconductors N.V. (Nasdaq: NXPI) in the largest semiconductor deal ever.
- Qualcomm will launch a tender offer valuing NXP at $110 per share, a 34 percent premium over the average closing price for NXP in the 200 days prior to news of a potential deal being reported Sept. 29.
- Qualcomm is up approximately 4 percent on news of the transaction, while NXP, already up on rumors of a deal, was up approximately 1 percent to just under $100 per share.
- The transaction creates a combined company with annual revenues of more than $30 billion, and is expected to be “significantly accretive” to non-GAAP EPS with $500 million in annualized synergies within two years of the transaction closing.
- The transaction is expected to close by the end of 2017, subject to regulatory approvals and other conditions.
Latest Semiconductor Transaction Brings Scale, Diversification
- From “Fabless” to Fabulous: Qualcomm is recognized as a pioneer of the “fabless” model, in which companies design chips but outsource the fabrication to outside contractors. Its chips are today manufactured primarily by Taiwan Semiconductor Manufacturing – but with this acquisition, Qualcomm inherits NXPs seven factories and additional packaging and testing facilities. While this requires new operating expertise, it has the potential for synergistic benefits.
Few Overlaps Means Many Opportunities: This acquisition pairs two companies known for their leadership in different sectors. Mobile chips currently represent 61 percent of Qualcomm’s revenue, rendering the company vulnerable to a weakening industry. NXP has focused on what it identifies as fast-growth sectors such as automotive (41 percent of its revenue) and near-field communications. This acquisition would reduce Qualcomm’s mobile dependence and create the potential for it to leverage other spaces with growing demand such as IoT and Security.- Putting Resources to Use: This transaction represents the second largest pure technology acquisition after Dell/EMC, and the total purchase price is approximately 25 percent higher than Qualcomm’s last-reported cash total (92 percent of which is offshore). However, as NXP is based in the Netherlands, Qualcomm can leverage its otherwise trapped cash hoard and finance additional debt through offshore cash generation.
- Consolidation Trend Keeps Growing: The semiconductor space has experienced more than $200 billion in M&A since the beginning of 2015, with many of the deals qualifying as massive “megamergers.” Notable transactions have included Avago’s $37 billion acquisition of Broadcom, Lam Research’s $11 billion purchase of KLA-Tencor, Intel’s $17 billion purchase of Altera and Softbank’s $32 billion acquisition of ARM Holdings.
Few Overlaps Means Many Opportunities: This acquisition pairs two companies known for their leadership in different sectors. Mobile chips currently represent 61 percent of Qualcomm’s revenue, rendering the company vulnerable to a weakening industry. NXP has focused on what it identifies as fast-growth sectors such as automotive (41 percent of its revenue) and near-field communications. This acquisition would reduce Qualcomm’s mobile dependence and create the potential for it to leverage other spaces with growing demand such as IoT and Security.For more information about this transaction, click here to read the press release.
martinwolf was not the advisor in this transaction.
