Qualcomm to buy NXP for $38 billion in largest chip deal

Qualcomm Inc agreed to buy NXP Semiconductors NV for about $38 billion in the biggest-ever semiconductor industry deal, expanding the reach of its chips from phones to cars.

The deal will make Qualcomm, which provides chips to Android smartphone makers and Apple Inc, the top supplier of chips to the automotive industry and help to reduce its dependence on the smartphone market.

San Diego-based Qualcomm, which gets most of its profit from wireless patents it licenses to the mobile industry, has been facing slowing smartphone sales and stiff competition from Chinese and Taiwanese rivals.

Qualcomm had sat out the transformative consolidation sweeping the industry, but Thursday's deal tops Avago's $37 billion acquisition of Broadcom last year.

The equity value of Qualcomm's offer is $37.88 billion, according to Reuters calculations based on the company's 344.4 million diluted shares as of Oct. 2. Including debt, it is worth roughly $47 billion, the companies said.

The combined entity is expected to have annual revenue of more than $30 billion.

Eindhoven-based NXP became the world's biggest maker of automotive electronics after it acquired US-based Freescale Semiconductor for about $12 billion last December.

Qualcomm said it would offer $110 per share in cash, a premium of 11.5% to NXP Semiconductor's Wednesday's close.

NXP's shares, which had risen 20% since reports of a potential deal emerged on Sept. 29, were up 2.9% at $101.55 in premarket trading on Thursday.

Qualcomm's shares were up 2.1% at $69.64.

The company said it intends to fund the transaction with cash on hand and new debt. Goldman Sachs and JPMorgan are providing committed debt financing for the transaction.

The transaction, which is expected to close by the end of 2017, is structured to use offshore cash flow in a tax-efficient manner to rapidly reduce leverage, Qualcomm said.

The company said it expects the deal to significantly add to adjusted earnings immediately upon its closing, and generate $500 million of cost savings annually within two years after the deal closes.

Goldman Sachs and Evercore were financial advisers to Qualcomm, while Centerview Partners LLC advised its board.

Qatalyst Partners, Barclays and Credit Suisse were financial advisers to NXP and Skadden, Arps, Slate, Meagher & Flom LLP and De Brauw Blackstone Westbroek were legal counsels.