Qualcomm may buy NXP in $30-bn deal

Talks are continuing and may still fall apart

Qualcomm is in discussions to buy NXP Semiconductors in what would be another act of consolidation in the chip-making industry, a person briefed on the matter said on Thursday.

If completed, a deal could be valued at more than $30 billion, given NXP's market value of roughly $28 billion as of Wednesday's market close. Talks were continuing and could still fall apart.

A union of Qualcomm and NXP would be the latest in an industry that has recently experienced big mergers. Earlier this year, SoftBank of Japan struck a takeover deal for ARM Holdings, a British chip designer, for $32 billion.

Last year, Avago Technologies bought Broadcom for $37 billion, while Intel paid nearly $17 billion for Altera.

NXP itself has been part of the trend as well. Less than two years ago, it bought a smaller peer, Freescale Semiconductor, for $11.8 billion to gain scale and negotiating leverage with customers like car companies and phone makers. NXP, which has its headquarters in the Netherlands but trades on the Nasdaq, has become a major supplier of chips used in near-field communications, which lets phones interact wirelessly with equipment like payment terminals.

Buying NXP would add tremendous scale to Qualcomm, which designs and makes chips primarily for smartphones. Yet the semiconductor company faced pressure from an activist hedge fund last year over its plans to spur growth. It weighed, and later abandoned, a potential split of its businesses.

For Qualcomm, adding NXP's products to its own lineup makes sense, according to analysts and investors. On Thursday - before The Wall Street Journal reported the discussions - analysts at Sanford C Bernstein published a research note ranking NXP as the top candidate for Qualcomm to buy.

"Such an acquisition could be highly accretive," the analysts wrote, estimating that a deal could add 30 per cent to Qualcomm's earnings.

The analysts cautioned that a deal that big still posed risks, particularly in how to integrate the two companies.

Qualcomm, whose market value as of Wednesday's close was about $93 billion, has substantial financial firepower to put toward an acquisition: As of June 26, the company held $17.1 billion in cash and short-term investments. Much of that cash is held offshore, according to the Bernstein analysts.

Representatives for Qualcomm and NXP declined to comment on the talks.

©2016 The New York Times News Service

ADDING VALUE

• If completed, deal could be valued at more than $30 bn; NXP's market value is roughly $28 bn
   
• Buying NXP would add tremendous scale to Qualcomm, which designs and makes chips primarily for smartphones
   
• Analysts also cautioned that a deal that big still posed risks, particularly in how to integrate the two companies
   
• NXP faced pressure from an activist hedge fund last year over its plans to spur growth