Qualcomm Secures Antitrust Approvals for NXP Deal -- Update
January 18 2018 - 2:12PM
Dow Jones News
By Natalia Drozdiak
BRUSSELS -- Qualcomm Inc. on Thursday said it won antitrust
approval in the European Union and South Korea for its $39 billion
acquisition of NXP Semiconductors NV after agreeing to a package of
measures to assuage regulators' competition concerns.
The approvals move Qualcomm closer to completing its acquisition
of Netherlands-based NXP, a deal that would make it one of the top
suppliers of chips used in cars at a time when auto makers are
increasingly embracing digital technology. The deal, which was
announced in October 2016, won U.S. approval the following
April.
The latest clearances come as Qualcomm fends off an unsolicited
bid from Broadcom Ltd. An enlarged Qualcomm that folds in NXP could
make it more challenging for Broadcom to take over the company,
given that that prospect has already stirred speculation about
antitrust obstacles.
"We are pleased that both the European Commission and the Korean
Fair Trade Commission have granted authorization of the NXP
acquisition, and we are optimistic that China will expeditiously
grant its clearance," said Qualcomm Chief Executive Steve
Mollenkopf. China is the last regulator to review the deal.
Even if approved by China, the deal could face an uphill battle
with NXP investors. NXP's stock price has exceeded Qualcomm's
$110-a-share offer since the summer, and shareholders had tendered
only 1.7% of outstanding common shares as of Jan. 12, when Qualcomm
last extended its offer. Investment manager Ramius LLC, a unit of
Cowen Inc., on Tuesday joined activist investor Elliott Management
Corp. in seeking a higher price.
Qualcomm has said it expects to close the deal early this year
at the original offer price.
In Nasdaq trading Thursday, NXP shares were ahead 0.6% at $120,
while Qualcomm was virtually flat at $68.05.
The EU opened an in-depth investigation into the merger in June,
citing concerns about higher prices and less choice in the
semiconductor industry. To address those issues, Qualcomm agreed to
grant rivals for a period of eight years licenses to NXP's
fare-collection technology used by transportation authorities in
Europe, the EU said.
The San Diego-based company also committed to ensure that its
own baseband chipset and NXP's near-field communications and
secure-element products would continue to function with those of
competitors for a period of eight years. The baseband chips allow
smartphones to connect to cellular networks while
near-field-communications and secure-element chips enable
short-range connectivity, which is used in particular for mobile
payments.
In addition, Qualcomm agreed not to acquire NXP's standard
essential patents as well as some nonessential patents for
near-field communications services, the EU said. NXP will instead
transfer those patents to a third party that would be obliged, for
three years, to grant others royalty-free licenses to use those
patents.
So-called standard essential patents are those deemed crucial to
compliance with an industry standard, such as 3G wireless
communication, and must be licensed on a fair, reasonable, and
nondiscriminatory basis -- known as FRAND.
Qualcomm would acquire some of NXP's other nonstandard essential
patents for near-field communications, but be obliged to grant
royalty-free licenses for their use.
Regulatory review of the NXP deal is only one of several
antitrust hurdles confronting Qualcomm. In Brussels, the EU
formally accused Qualcomm in 2015 of illegally paying Apple Inc. to
exclusively use its chips and selling chips below cost to force a
competitor, Icera Inc., out of the market. Qualcomm has said its
sales practices comply with EU competition law.
In the U.S., the Federal Trade Commission sued Qualcomm a year
ago alleging it engaged in unlawful tactics to maintain a monopoly
on cellular-communications chips. Qualcomm has said the suit is
based on flawed legal theory and misconceptions about its
business.
Broadcom is also currently under investigation by the FTC over
whether it engaged in anticompetitive tactics in negotiations with
customers, The Wall Street Journal reported Wednesday. Broadcom in
response said the review was "immaterial to our business, does not
relate to wireless and has no impact on our proposal to acquire
Qualcomm."
Broadcom, which is co-headquartered in San Jose, Calif., and
Singapore, launched a bid in November for Qualcomm that was
rejected by the latter's board. Broadcom has since proposed
replacing Qualcomm's board of directors and the matter will be put
to a shareholder vote in March.
--Ted Greenwald contributed to this article.
Write to Natalia Drozdiak at natalia.drozdiak@wsj.com
(END) Dow Jones Newswires
January 18, 2018 13:57 ET (18:57 GMT)
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