Qualcomm is moving to decide how to price NXP deal to lure in enough shareholders
Qualcomm is working overtime to figure out a price at which to acquire NXP Semiconductors, sources tell CNBC.
NXP, which trades in the US on the Nasdaq, closed above $118, and a potential deal could involve buying the company somewhere in the "low $120s," a source told CNBC.
The deal, if consummated, would be worth more than $40 billion.
Qualcomm QCOM and its advisors have been working to reassert control over the company's deal to acquire NXP Semiconductors NXPI this weekend, by trying to figure out what price will be enough to garner the 80 percent of shares needed to close the deal, sources tell CNBC.
On Friday, Qualcomm's advisors at Goldman Sachs began contacting large holders of NXP to ascertain at what price those holders would be willing to sign voting agreements stipulating their support for a deal, according to people familiar with the conversations.
While no specific price was offered, Qualcomm's advisors were said to have broached "the low $120's" as a possibility for a deal. Since the first calls were made late on Friday and Saturday there has not been any follow-up, perhaps an indication that little progress has been made on reaching a satisfactory price. NXP's shares, traded in the U.S. on the Nasdaq, ended Friday's session at $118.50.
This is Qualcomm's first effort in months to see what price large holders of NXP Semi would be willing to accept in order for Qualcomm to close the all cash deal, which is worth more than $40 billion. In the roughly 16 months since Qualcomm agreed to pay $110 a share for NXP, many of its shareholders have decided the company would be worth more if it remained independent. This is due to its strong fundamentals, and the increase in the earnings multiple applied to the peer group of which it is a part.
Normally, such concerns would have no bearing on the closing of the transaction, but under Dutch law NXP's purchase is structured as a tender offer requiring at least 80 percent of the shares be purchased by Qualcomm in order for it to take control.
With large blocks of stock held by hedge funds such as Elliott Management, Davidson Kempner, Och Ziff, Soroban Capital, Pentwater and D.E. Shaw, Qualcomm has been forced to recognize it won't be able to gain the shares necessary to close the deal unless it increases the price it is willing to pay.
While Elliott has said publicly it believes NXP is worth at least $135 a share, enough other large holders may be amenable to a deal between $125 and $130, such that Qualcomm could be confident it would win their shares were it to tender at a price in that range.
At the same time Qualcomm has been trying to figure out how to close the NXP deal, it has also been resisting efforts by Broadcom to acquire it for $82 a share in cash and stock. Late on Friday, the influential proxy advisory firm ISS told clients it recommends electing four of the six directors Broadcom is nominating for Qualcomm's board of directors.
In its report, ISS also encouraged Qualcomm to close the NXP deal as the "next best safety net of diversification" barring a deal to sell itself to Broadcom.
Officials at Qualcomm did not return CNBC's calls for comment.
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