Despite the fact that QUALCOMM, Inc. (NASDAQ:QCOM) had agreed to acquire NXP Semiconductors NV (NASDAQ:NXPI) at a price of $110, the share was trading at a price above that. According to Jim Cramer, a television personality and founder of The Street, this is an indication that shareholders are not willing to tender the takeover.
“That to me is a sign that people are not going to tender the takeover, and we’re not recommending that people tender,” said Cramer while speaking from the New York Stock Exchange floor.
Revenue diversification
Cramer noted that NXP’s work in Internet of Things, near-field communications and self-driving cars was proof that the price Qualcomm was willing to pay was lower than its true value. Additionally Cramer argued that NXP Semiconductors needs Qualcomm more than the other way round since circumstances demanded that it diversify away from mobile devices.
As an acquisition target NXP Semiconductors would be instrumental in assisting Qualcomm diversify revenue streams. Analysts estimated that NXP could generate total revenues of about $9 billion in the current fiscal year. This is from automotive chips as well as NFC technologies. More than one and half years ago, NXP Semiconductors revealed its intentions to acquire Freescale Semiconductor with a view to diversifying and broadening its portfolio of automotive chips.
Falling number of tendered shares
But Qualcomm’s bid to acquire NXP Semiconductor has not been smooth-sailing as there has been a consistent month-on-month decline in the quantity of shares tendered since March. In March the number of tendered shares was 17.2% of total outstanding shares. Towards the end of last month the number of tendered shares was 7.6%.
Qualcomm’s bid to NXP Semiconductors comes at a time when it is involved in a legal dispute with Apple over intellectual property. The dispute stems from a disagreement over the amount that Apple is required to pay for the patents it uses that belong to Qualcomm. According to the chief executive officer of Qualcomm, Steve Mollenkopf, the chipmaker’s business model is what has made it susceptible to legal challenges.
On Wednesday shares of Qualcomm Inc fell by 0.41% to close the day at $ 52.95.
