When NXP Semiconductors (NASDAQ: NXPI) becomes a part of chip giant Qualcomm (NASDAQ: QCOM) later this year, CFO Dan Durn isn't coming along for the ride. The former financial head of Freescale Semiconductor is moving on to the same role at Applied Materials (NASDAQ: AMAT) on Aug. 7.
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This may look like just another career move, but Durn's move puts NXP one step closer to finalizing the merger with Qualcomm. Here's how.
What's the big deal?
Above all else, Durn's farewell is a solid sign that the Qualcomm deal is on the cusp of completion.
In the press release that announced Durn's new plans, NXP CEO Rick Clemmer stopped just short of saying as much.
"His leadership has been a key contributor of the successful integration of Freescale, and directly positioned NXP to successfully prepare for the coming acquisition by Qualcomm," Clemmer stated.
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That's simply "the coming acquisition by Qualcomm," with no hedging whatsoever. No "pending acquisition," not a "planned acquisition," nor even an "acquisition awaiting approval by the European Commission." All of these would have been absolutely accurate, and NXP's legal team probably suggested language along those lines. But the press team still felt comfortable with the "coming acquisition" construct, attributed to Rick Clemmer and all.
CEOs don't throw that kind of statement around lightly. We would never see Clemmer put his signature on such a claim unless the Qualcomm deal were close to the final John Hancocks.
Another big clue is the fact that Durn feels free to move on without disrupting the merger process. Put two and two together, and you're suddenly standing right next to a complete Qualcomm merger.
So that's the biggest takeaway I see in Dan Durn's departure.
Why I could be wrong
Sure, this is a solid upgrade from Durn's point of view as well. NXP is a large and well-respected chipmaker that casts a particularly large shadow over the automotive computing and near-field communications markets. The company sports trailing revenues of $9.5 billion and annual EBITDA (earnings before interest, taxes, depreciation, and amortization) profits of more than $2.6 billion.
Applied Materials is still much larger, dwarfing NXP by more than 30% on both the top and bottom lines. So if Durn just wanted to manage a deeper and richer financial machine, the provider of semiconductor manufacturing services certainly fits that bill.
If so, this move means nothing at all for the Qualcomm merger.
Why I'm still right
The clues are piling up, and they're more than just Dan Durn's evolving career plans:
- The group of activist investors who were pushing for a higher buyout price in May and June have fallen eerily silent lately. The group, led by private equity firm Elliott Management, appears to have thrown in the towel already.
- NXP's share prices have stabilized just below Qualcomm's official cash offer of $110 per share. I mean, the room for deal-pricing arbitrage has fallen to $0.16 per share as of this writing. This is what stock charts look like just before the final buyout papers are signed.
- And from the other side, Qualcomm has completed its funding for the NXP deal. The company has raised $11 billion of new debt and started to consolidate its overseas cash reserves.
You should keep an eye out for the European Commission's final approval of the NXP-Qualcomm deal any day now, followed by approvals in Japan, the Philippines, and South Korea. The review in China might take longer, but Taiwan already gave this deal the go-ahead. So after China's rubber stamp, it won't be long before we see skyrocketing numbers of NXP shares being committed to Qualcomm's tender offer.
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