After trying hard for a year, it seems that QUALCOMM, Inc. (NASDAQ:QCOM) is likely to acquire NXP Semiconductors NV (NASDAQ:NXPI).
Qualcomm has been asked to resubmit the application to MOFCOM of China in April 2018. The regulator has not yet granted the permission for $47 billion acquisition. The country is reportedly reviewing the deal again amid hard stance taken by President Trump against China on tariffs and trade and asking for more concessions.
Amit Daryanani of RBC Capital has set the price target of $70 for the stock. It is based on the assumption that China has accorded approval for the sale of NAND flash production facility of Toshiba Corp. The deal is valued at $18 billion.
According to a view by an analyst, the regulator is under pressure to respond positively to the deal. Another analyst is predicting that another mega-deal is likely receiving the approval and the next one could be Qualcomm and NXP deal.
According to Daryanani, the probability of getting MOFCOM approval for the QCOM/NXPI deal is improved a lot. If it fails to get an approval, QCOM may buy back a large chunk of its stock.
George S Davis, Chief Financial Officer of Qualcomm said, if it is unable to get the approval for the deal, the company will go for a repurchase in the range of $20 billion to $30 billion.
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Therefore, Daryanani sees an attractive value for the investors in Qualcomm in terms of either a deal or a large buyback. It is more likely that the companies like Apple Inc. (NASDAQ:AAPL) will settle the disputes such as license deals with Qualcomm soon.
The Chinese Government is opting for maintaining homegrown chip makers and reduce dependence on NXP and Qualcomm. However, it takes a long time to realize its dream. Therefore, Chinese firms need to depend on the US based chip firms to improve their prospects.
From this perspective, it is more likely that China may give its approval for the merger of NXP and Qualcomm but may seek big concessions. The merger with NXP gives Qualcomm an edge in automotive computing. Therefore, Qualcomm is likely bending towards the quick approval.