Qualcomm Set to Win European Approval for $39 Billion NXP Buy -- 2nd Update
January 11 2018 - 12:46PM
Dow Jones News
By Natalia Drozdiak
BRUSSELS -- Qualcomm Inc. is set to clinch conditional European
Union antitrust approval for its $39 billion acquisition of NXP
Semiconductors NV, as soon as next week, according to people
familiar with the matter, as the semiconductor company fends off
unsolicited bids by Broadcom Ltd.
The EU opened an in-depth probe into the Qualcomm-NXP deal last
June on concerns the deal could lead to higher prices, less choice
and reduced innovation in the semiconductor industry. Qualcomm has
since made commitments to assuage those fears.
Qualcomm's commitments include a pledge not to buy NXP's
standard essential patents, plus assurances that rival products
will still function with NXP's, according to one of the people
familiar with the matter.
The European Commission said in June it was concerned the merged
company would hold strong market positions in both cellular
chipsets and chips for near-field communications, incentivizing it
to exclude rival suppliers from the market or modify NXP's current
intellectual property licensing practices. The EU also said the
deal might remove competition for chips used in the automotive
sector.
Qualcomm agreed to buy Netherlands-based NXP in October 2016, in
a deal that would make it one of the top suppliers of chips used in
cars, at a time when manufacturers are building automobiles with
greater computer power and self-driving models develop.
The U.S. already has cleared the deal, but the merger still
faces review elsewhere. Approval in Europe would pave the way for
clearance in China and South Korea, which often wait for a decision
from Europe, according to people familiar with international
antitrust regulation.
At that point, Qualcomm will need to persuade NXP shareholders
to tender their shares. Only 1.9% of NXP's outstanding common
shares were tendered as of mid-December, when Qualcomm last
extended its offer.
Qualcomm has been under pressure from activist shareholders to
raise its offer beyond $110 a share, potentially shuffling the deck
in its negotiations with Broadcom. Qualcomm has said it expected
its purchase of NXP to close early this year at its original offer
price.
The U.S. has already cleared the deal, but the merger still
faces review from other jurisdictions, including China.
The Financial Times has reported the EU's clearance could come
as soon as next week.
Qualcomm's merger with NXP would enlarge the company, just as
Broadcom has been angling to take it over. Broadcom, which is
currently 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.
If a deal is reached, it would face scrutiny from regulators in
multiple countries over market dominance, innovation and national
security.
The EU continues to scrutinize Qualcomm's behavior in other
areas. The commission 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 previously said its sales practices "have
always complied with European competition law."
Qualcomm, based in San Diego, is the largest supplier of chips
for mobile devices, including baseband chips that provide cellular
connections and processors that run smartphone applications.
However, Qualcomm earns most of its profits from charging
handset makers royalties for using its cellular patents. Most
government investigations so far have focused on its licensing
practices.
The U.S. chip maker's legal woes grew in 2017 after Apple opened
a legal battle against it by suing Qualcomm in the U.S. and later
in China and the U.K. -- building on international resistance to
Qualcomm's patent-licensing business that has included antitrust
investigations and fines in China, South Korea and the U.S.
Write to Natalia Drozdiak at natalia.drozdiak@wsj.com
(END) Dow Jones Newswires
January 11, 2018 12:31 ET (17:31 GMT)
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