Elliott boosts stake in NXP; slams Qualcomm’s buy bid
January 21 2018 08:57 PM
Visitors gather around the NXP Semiconductors pavilion at the Mobile World Congress in Barcelona in March 2015. Qualcomm can afford to pay more than the $110 a share being offered by NXP, Elliott said, adding that the company needs to complete the NXP deal to bolster growth.

Bloomberg/San Francisco

Elliott Management Corp, the activist firm that is pushing Qualcomm Inc to raise its $47bn acquisition offer for NXP Semiconductors NV, increased its stake in the Dutch chip maker, showing its commitment to getting a better deal.
The stake Elliott controls is now worth about $2.7bn, equivalent to about 6.6% of NXP, the investment firm said in a letter published on Friday. Qualcomm can afford to pay more than the $110 a share being offered, Elliott said, adding that the company needs to complete the NXP deal to bolster growth and that NXP stock would be trading at a higher price if it weren’t being held down by the bid.
“The current $110 offer is not even in the right zip code and a credible offer from Qualcomm requires a price in excess of our estimate of NXP’s standalone fair value of $135 per share,” Elliott said in the letter addressed to NXP’s shareholders.
After more than a year seeking regulatory approval for the acquisition, which would be Qualcomm’s biggest ever, the process is reaching the final phase — setting the stage for Qualcomm’s negotiations with a group of investors who’ve piled into NXP stock with the goal of extracting a higher price. 
The situation has been further complicated by a hostile $105bn bid for San Diego-based Qualcomm by rival Broadcom Ltd, which would be the largest technology deal in history.
In response to Elliott’s letter, a Qualcomm spokesperson reiterated comments made earlier this week by executives: NXP is an attractive opportunity but Qualcomm will stay disciplined and won’t pay more than makes sense for shareholders. While it would prefer to close the deal, that won’t be done at all costs.
Qualcomm gets the majority of its revenue from selling chips that run programs in smartphones and connect them to cellular networks. The company’s earnings have suffered as its right to charge for technology licenses, which provide the bulk of profit, have been challenged by customers and governments worldwide.
Buying NXP would give it a bigger piece of the growing market for chips that add electronic functionality to automobiles — something Qualcomm needs to broaden its business and reverse the slowdown that made it a target for Broadcom, Elliott wrote.
“We believe any other transaction would likely seriously delay Qualcomm’s strategic overhaul, an overhaul which has been at the heart of their defence against Broadcom’s hostile offer,” it said in the letter.
Earlier this week Qualcomm told shareholders that if it doesn’t complete the NXP deal, it could instead use its industry-leading cash hoard for “a large share repurchase,” which would deliver equivalent value to its owners.
In its letter, Elliott dismissed that as “no substitute” for a strategic transaction, and repeated analysis that the firm says shows NXP would be trading at $135 without Qualcomm’s offer. Qualcomm will need to offer a premium above that to get to a fair price, Elliott said.

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