What's going on?

Qualcomm, the giant chip designer, agreed to sweeten its bid for NXP Semiconductors on Tuesday, putting to bed a standoff with activist investors � and potentially putting the kibosh on a different deal�

What does this mean?

Back in 2016, Qualcomm agreed to pay $110 per share (about $38 billion) to take over Netherlands-based NXP. At the time, NXP�s share price was struggling, and Qualcomm was attracted to its burgeoning foothold in automotive and industrial chips � both fast-growing areas. Approval for the deal was delayed as various countries� competition authorities reviewed it (China is still yet to give the nod). In the meantime, NXP�s operational performance improved, and stock prices of rival semiconductor firms jumped significantly higher.


Enter the activists� a posse of hedge funds, led by Elliott Advisors, demanded Qualcomm up its bid to seal the deal � which Qualcomm has now agreed to do. In return, Elliott and other shareholders have said they will support the deal at the new price.

Why should I care?

For markets: NXP�s shareholders just got the icing on the cake. (tweet this)

While Elliott had argued that NXP was worth at least $135 per share, they and others appear happy to take their ball and go home at $127.50 per share. This represents a 16% premium to the original deal price � although it�s only 7.5% above where NXP�s stock finished on Friday, as investors were already betting on such an outcome.


The bigger picture: It�s now less likely that Qualcomm will itself be bought.

A few months ago, Broadcom (another competitor) made an offer to buy Qualcomm � and it recently increased the amount it�s willing to pay. However, Broadcom has previously said it would walk away if Qualcomm agreed to pay more than $110 per share for NXP. Qualcomm�s management � though not all of its shareholders � believe it�s better off on its own, and so paying up for NXP has the added benefit, for them, of deterring Broadcom.