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Qualcomm raises bid to acquire NXP Semiconductors to $44 billion

Updated: The news is likely to be received with little warmth by Broadcom.

Qualcomm has agreed to a price of $44 billion to acquire NXP Semiconductors potentially in order to strengthen itself against a takeover bid by Broadcom.

On Tuesday, Qualcomm said that Qualcomm River Holdings B.V., a subsidiary of the US chipmaker, has agreed to increase its buyout offer to secure NXP Semiconductors to $127.50 per share from $110 per share.

According to the announcement, the Qualcomm and NXP boards of directors have approved the deal.

The amended agreement, worth roughly $44 billion, will allow Qualcomm to purchase all outstanding shares of NXP following the announcement of the acquisition in 2016.

Under the terms of the deal, the minimum Qualcomm purchase condition of NXP's outstanding shares has been reduced from 80 percent to 70 percent, and the increased price has prompted the support of NXP shareholders led by Elliott Management, which originally opposed the deal.

Qualcomm has now been able to enter into binding agreements with nine NXP stockholders which collectively own over 28 percent of NXP shares.

The US chipmaker intends to fund the deal through a combination of cash and debt.

"Qualcomm's leading SoC capabilities and technology roadmap, coupled with NXP's differentiated position in automotive, security and IoT, offers a compelling value proposition," said Steve Mollenkopf, CEO of Qualcomm. "We remain highly confident in our fiscal 2019 Non-GAAP EPS target of $6.75-$7.50, which includes $1.50 per share accretion from the acquisition of NXP."

The expiration date to finalize the deal has also been extended to 5 March 2018, having received required regulatory approval from eight out of nine involved regulatory bodies.

The timing of the announcement is of interest considering Broadcom's recent hostile bid to acquire its rival in the semiconductor space.

Broadcom originally offered to acquire Qualcomm in November in a deal worth roughly $130 billion. However, this attempt was firmly rejected, leading to a best-and-final offer this month valued at approximately $146 billion in cash, stock, and the assumption of Qualcomm debt.

A condition of the buyout was that Qualcomm would either complete the NXP acquisition at the already-agreed rate of $110 a share in cash or withdraw from the deal altogether.

Now Qualcomm has not only rejected Broadcom's deal once more as a "significant undervaluation" but has also raised its bid for NXP Semiconductors, the company seems to be making its feelings known when it comes to Broadcom's bid.

After months of Broadcom paying court to Qualcomm and its shareholders -- while Qualcomm constantly fended off such attention -- the pair met last week to discuss the acquisition.

See also: Qualcomm, Broadcom meet: Is there a thaw in this hostile takeover dance?

Qualcomm Chairman Paul Jacobs said the offer on the table was still too low to consider, and while the meeting was "constructive," the offer and potential regulatory hurdles have instilled little confidence in a potential deal.

Despite Broadcom's offer of a breakup fee should regulators break up the acquisition, Jacobs insisted that the offer "does not come close to compensating for [..] risks" to shareholders.

Update 14.42 GMT: Broadcom has issued a statement saying the company is "evaluating its options" in light of the news, commenting:

"By raising its offer for NXP from $110 per NXP share to $127.50 per NXP share, Qualcomm's board of directors and management have transferred $4.10 per Qualcomm share from Qualcomm stockholders to NXP stockholders, representing approximately $6.2 billion of value.

This revised price for NXP is well beyond what Qualcomm has repeatedly characterized as a "full and fair" price. We believe any responsible board would have seriously engaged with Broadcom regarding Broadcom's value-maximizing offer and the terms of the NXP acquisition, particularly in light of the recent recommendations from ISS and Glass Lewis.

Broadcom believes the price increase demonstrates the Qualcomm board's disregard for its fiduciary duty to maximize value for Qualcomm stockholders."

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