Qualcomm Vs. Magna For Automotive Chipmaker Veoneer: Potential Bidding War?

The race to buy automotive chipmaker Veoneer Inc. VNE is heating up following the entry of QUALCOMM, Inc. QCOM into the fray.

2-Way Race For Veoneer: Qualcomm, a manufacturer of wireless chips for smartphones, announced Thursday it has placed a bid to buy Veoneer for $27 per share in cash.

This represents a total equity value of $4.6 billion based on an estimated 123 million fully-diluted shares outstanding.

But in late July, Veoneer and Canadian auto parts manufacturer, Magna International Inc. MGA, announced a definitive merger agreement, under which Magna will acquire Veoneer for $31.25 per share in cash, or a total deal value of $3.8 billion.

Inclusive of Veoneer's cash, net debt and other debt-like items, the enterprise value worked out to $3.3 billion.

Qualcomm said in Thursday's statement its offer represented an 18% premium to Magna's offer. The company noted the offer has been approved by its board and it does not require approval by its shareholders. The offer is also not contingent on financing conditions, as Qualcomm expects to fund the transaction with existing cash resources.

Related Link: Qualcomm CEO-Elect Cristiano Amon Speaks At BofA Securities Event: Why Is An Analyst Bullish?

Qualcomm's Deal Rationale: "The combination of Arriver's differentiated Computer Vision, Drive Policy and other Driver Assistance assets, along with Qualcomm's leading Snapdragon Ride platform, broad technology portfolio and automotive customer traction will enable us to transform the ADAS segment, creating open and competitive platforms for automakers and Tier-1s," Qualcomm's CEO Cristiano R. Amon said in a letter to Veoneer's board.

Qualcomm sees the proposed deal as consistent with its growth and diversification strategy. The company continues to see traction in automotive, with a revenue-design win pipeline of approximately $10 billion.

The interest in Veoneer comes at a time the auto industry is reeling under the impact of a global semiconductor shortage.

What's Next: Qualcomm said it is prepared to immediately commence a focused diligence process, which it hopes to complete shortly.

The company also said it will agree to the same regulatory provisions as the Magna agreement and expects to provide even greater regulatory-related closing protection following due diligence.

It remains to be seen if Magna will raise the stakes to acquire Veoneer. In the eventuality of a bidding war, Qualcomm, with its deep pockets and clout, is likely to emerge as the ultimate winner.

At last check Thursday, Veoneer shares were rallying 26.18% to $38.43 and Magna was advancing 1.95% to $84.11, while Qualcomm shares were slipping 1.34% at $146.23.

Photo: Courtesy Veoneer