Qualcomm gets hedge fund nod with raised offer for NXP

Mergers and AcquisitionsReuters

Feb 20 (Reuters) - U.S. chipmaker Qualcomm Inc raised its offer to buy NXP Semiconductors NV to $127.50 per share on Tuesday, and said it has the backing of the shareholder group led by hedge fund Elliott Management that opposed its previous proposal.

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The new deal puts pressure on fellow chipmaker Broadcom to decide if it will stick with a stipulation in its $121 billion bid for Qualcomm that the company not raise its previous $110 a share offer for NXP.

It also enables Qualcomm shareholders to better assess the standalone value of Qualcomm as they consider whether to back it in a shareholder vote on its fight with Broadcom on March 6.

"We continue to believe Qualcomm's negotiating position into a shareholder vote is likely stronger with NXP, and that closing it as a 'Plan B' remains important," Bernstein analysts wrote in a note last week.

The new offer also comes less than a week after Broadcom and Qualcomm executives met face-to-face to discuss the differences between the two sides. Neither company responded to requests for comment on Tuesday's offer.

NXP's shares were up 6.5 percent at $126.15 in premarket trading. The stock has traded above the original offer price for nearly seven months as investors expected a revised offer.

Shares of Qualcomm were down 2.9 percent and those of Broadcom were down 0.5 percent.

NEW TERMS

The buyout of NXP will help Qualcomm, which provides chips to Android smartphone makers and Apple Inc, to expand in the fast-growing market for chips used in automobiles and reduce its dependence on a cooling smartphone market.

Under the new terms agreed with NXP's board, Qualcomm said it needs to buy a minimum 70 percent of NXP's outstanding shares in a tender offer, instead of the 80 percent required in the earlier agreement. The latest offer values NXP at $44 billion.

If Qualcomm does buy more than 70 percent in the tender offer, it can force the remaining shareholders to sell out without further negotiations.

San Diego-based Qualcomm agreed to buy Netherlands-based NXP for about $38 billion more than a year ago, but some NXP shareholders resisted a sale seeking a better price.

Qualcomm said on Tuesday it had entered into agreements with nine NXP stockholders, who collectively own more than 28 percent of NXP, including top shareholder Soroban Capital Partners LP and second-largest Elliott.

Activist hedge fund Elliott, which had resisted Qualcomm's previous $110 per share offer saying it undervalued NXP, said it was pleased that NXP's value had been recognized in the revised transaction terms.

Qualcomm has also extended its tender offer for NXP until March 5, a day before the shareholder meeting, when Broadcom's slate of directors will also go to a vote.

Qualcomm had previously resisted increasing the offer price and last month said it would boost its buyback as an alternative to buying NXP.

"Our preference is to close NXP, but not at all costs," Qualcomm Chief Financial Officer George Davis said on a post-earnings conference call in January.

Qualcomm, which plans to fund the additional $6 billion with cash on hand and new debt, said approval from China's Ministry of Commerce is the only regulatory nod remaining for the closure of the NXP deal.

(Writing by Supantha Mukherjee; Editing by Saumyadeb Chakrabarty and Patrick Graham)