NXP CEO Blames Politics for No Qualcomm Merger, Will Avoid Deals

(Bloomberg) -- NXP Semiconductors NV isn’t likely to go deal hunting anytime soon, even after banking $2 billion after U.S. suitor Qualcomm Inc. withdrew its $44 billion bid after failing to receive regulatory approval from China in time.

While China denied its decision had anything to do with trade tensions, Richard Clemmer, NXP’s chief executive officer, said in an interview the push-back from China was a “purely political decision”, and that “there was no legal or power issue that prevented the transaction”, or “any issue that was phrased by China relative to the merger.” He added the Chinese regulator went quiet for a period of time.

NXP will also refrain from pursuing big acquisitions or mergers of equals, preferring smaller bolt-ons that add new technology, and blaming the current regulatory environment.

“Uncertainty will keep us from doing such a deal in the near future,” Clemmer said.

NXP will instead buy back $5 billion of shares, and expand on its strategy as a standalone company during an upcoming analyst day in New York City on Sep. 11. It has already received $2 billion from Qualcomm in deal termination fees.

Shares of Eindhoven, Netherlands-based NXP fell as much as 8.25 percent to $90.25 on Thursday. San Diego-based Qualcomm jumped about 6.8 percent. Qualcomm had been offering $127.50 per share for NXP.

The takeover, unveiled almost two years ago in October 2016, may be the highest-profile victim yet of the trade spat between China and the U.S., with every other jurisdiction in the world long since clearing the bid. Qualcomm had until midnight in New York on July 25 to get sign-off from regulators, who have delayed approval for months.

NXP’s board is actively discussing initiating a dividend and the company will give an update during its analyst day, Clemmer said during a conference call. He wouldn’t rule out future partnerships with Qualcomm, though he added that’s premature to discuss at this time.

NXP, which started life as Koninklijke Philips NV’s chip unit, also reported second-quarter earnings on Thursday. The company expects a 9 percent increase in revenue for the third quarter at $2.5 billion compared to the second quarter. Analysts expect $2.46 billion on average, according to data compiled by Bloomberg.

Operating income is expected to rise to as much as $208 million, with an operating margin increasing to up to 8.3 percent, NXP said.

©2018 Bloomberg L.P.