Qualcomm Secures Antitrust Approvals for NXP Deal -- Update
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)