QUALCOMM, Inc. (NASDAQ:QCOM) gave Nxp Semiconductors Nv (NASDAQ:NXPI) shareholders one more month to decide on the $110 per share offer. Qualcomm needs not less that 80% of NXP shareholders to approve its $47 billion acquisition proposal. As it stands, only about 17.2% of NXP’s shares have been tendered. The initial deadline that had been set for March 7 has been pushed to April 4 with a window for additional extensions.
Although the extension may drag a major step in closing the deal, the parties involved in transaction have to go through a long process of regulatory review in the European Union, the U.S., Japan, China, Mexico, South Korea, Taiwan, Russia and Philippines. The deal hasn’t received any challenger may be because of the fact that the deal is very large which leaves shareholders with minimal options of choosing a better bid.
NXP shares dropped on Tuesday at $103 while Qualcomm shares rose, trading at $56.65 on Tuesday morning.
Even is the deal fails to successfully sail through, NXP would be worth over $110 per as a standalone firm. This is according to founder of TheStreet and manger of Action Alerts PLUS portfolio that owns NXPI Jim Cramer. Cramer says the possibilities of the deal unwinding are very shrewd. This is due to the price quoted by Qualcomm and which limits its completion. “You probably don’t have many competing suitors at a higher valuation,” says Drexel Hamilton analyst Cody Agree. He adds that this has significantly limited the options available for NXP shareholders.
Tender offers give buyers a much easier path as they seek to win the approval of shareholders. This is possible without seeking the approval of the proxy company that can criticize the proposal. Investors are also motivated to take part as shareholders who decline the tender offer are later paid if the deal fails to sail through.
Even Qualcomm gets the go ahead from shareholders; the deal will be subjected to intense regulatory scrutiny. The company has already said they are unlikely to close the deal not until late 2007.
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