9 And Counting: Qualcomm's NXP Buyout Offer Deadline Extensions Could Continue

QUALCOMM, Inc. QCOM has got an unfinished agenda in hand. Nearly a year after agreeing to buy NXP Semiconductors NV NXPI, the acquisition has yet to be completed. For that matter, NXP was reportedly courted by Broadcom Ltd AVGO also, before the definitive agreement was announced.

For the uninitiated, Qualcomm announced on Oct. 27, 2016 a deal to buy NXP for $110 per share in cash.

The deal was structured like this: Upon the agreement, a Qualcomm subsidiary was supposed to commence a tender offer to buy all of the issued and outstanding shares of NXP. The tender offer was conditioned on the tender of at least 95 percent of the outstanding ordinary shares of NXP, or if NXP shareholders approve the asset sale contemplated in the purchase agreement, the tender of at least 80 percent of the outstanding shares of NXP.

The deal was originally intended to close by the end of 2017.

Tender Offer And The Many Extensions

The tender offer, which commenced on November 18, 2016, offered time until 5 p.m. ET on Feb. 6, 2017, for tendering of the shares.

Subsequently, Qualcomm announced an extension of the expiration of the offer to 5 p.m. ET on March 7, 2017. The extension came about due to the tendering of merely 49.60 million shares or about 14.8 percent of the outstanding shares by Feb. 3, 2017.

The deadline was extended to April 4; by 5 p.m. ET on March 16, only about 17.2 percent of the outstanding shares were tendered.

For the third time, the deadline for tendering the shares was extended to May 2, 2017, with just about 16.3 percent of the outstanding shares tendered by April 3.

Qualcomm extended the deadline yet again, this time to May 31, 2017, marking the fourth extension. By May 1, only about 14.9 percent of the outstanding NXP shares were tendered.

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With only 14.1 percent of the outstanding shares tendered by March 30, the company had no other recourse but to extend the deadline for the expiry of the tender offer for the fourth time to June 28, 2017.

The deadline was extended to July 27, 2017, after only 12.5 percent of the outstanding shares were tended by June 27.

The seventh extension came about, with the companies announcing an Aug. 24 deadline, which was subsequently extended to Sept. 22 and then to Oct. 20. The number of extensions announced thus far is nine.

Meanwhile, the proportion of shares tendered have dropped to 3.2 percent.

Way Forward

Given that the deal has yet to be approved by the European Commission, the extensions are a blessing in disguise, allowing ample time for securing regulatory approval.

The shares have been volatile around the period when extensions were announced, although the reaction was only measured.

With the EU not expected to announce its verdict on the deal until December, it is believed there could be more extensions to the tender offer expiry deadline.

Given that only a fraction of the required total has been tendered, a smooth sailing now seems less of a possibility. The picture gets all the more complicated, as hedge fund Elliott Management Corp and two other major shareholders have been pressurizing NXP to renegotiate the terms of the deal.

A non-approval, either due to financial and regulatory issues would mean Qualcomm paying a break-up fee of $2 billion to NXP, while if the latter reneges, then it is liable to pay $1.3 billion as cancelation fee.

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