Qualcomm Merger Calculus Complicated by Activist Investor

Qualcomm Merger Calculus Complicated by Activist Investor

Qualcomm is in the midst of a tender offer to buy out NXP shareholders but has collected only a fraction of stock. Qualcomm has asserted that the deal, which is still awaiting approval from all relevant antitrust authorities, was on track and that shareholders would most likely sign on toward the end of the tender offer.

But Elliott is hoping to persuade more investors to hold out, arguing that NXP is worth much more.

Elliott argued in a presentation that the market has not fully appreciated how much of a revival NXP’s business has enjoyed, particularly after the company fully processed its acquisition of another chip maker, Freescale Semiconductor. The hedge fund argued that Qualcomm’s takeover bid effectively serves as a cap on how high NXP’s shares can go, though $135 a share is far higher than the stock’s historic high.

“While NXP’s operating performance has fully bounced back over the past year, its stock price has not — again, likely due to, in our view, the ceiling created by Qualcomm’s low priced offer,” Elliott wrote in a letter to its fellow shareholders.

Some analysts and investors had wondered whether trouble in the NXP deal could actually help Qualcomm fend off Broadcom’s unwanted advances. As part of its $70-a-share takeover bid, Broadcom said that the NXP deal should not go higher than its current $110 a share price.

But in a statement on Monday, Qualcomm suggested that it was not interested in using the NXP deal as a defensive measure. “Elliott’s value assertion for NXP is unsupportable and is clearly nothing more than an attempt to advance its own self-serving agenda,” it said.

Qualcomm has argued in the past that other chip makers have taken a look at buying NXP and passed. And NXP’s own chief executive, Richard Clemmer, said on his company’s most recent earnings call in October that the deal was “extremely compelling.”

NXP and Broadcom declined to comment.

Shareholders in NXP did not appear to be particularly moved by Elliott’s pronouncement. Shares in the chip maker rose only slightly on Monday, to $115.84, far below the activist investor’s assessment.

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