Qualcomm edged closer to completing a proposed $38 billion acquisition of NXP Semiconductors after receiving clearance from European and South Korean regulators.
In a statement, Qualcomm said the acquisition had now received the green light from eight of the nine regulators required, following approval from the European Commission (EC) and Korea’s Fair Trade Commission (KFTC) with only China remaining.
Qualcomm CEO Steve Mollenkopf welcomed the decision, and said it was “confident that China will expeditiously grant its clearance”.
Remedying EC concerns
Financial Times reported last week the two companies had addressed EC competition concerns and approval was pending. The EC, which opened a probe into the deal in June 2017, stated approval was conditional on “full compliance with commitments offered by Qualcomm”.
The EC said it had been concerned the merged entity would make it difficult for other suppliers to access NXP’s Mifare technology by raising licensing royalties or by ceasing to licence it at all.
On this point, the EC said Qualcomm committed to offer competitors licences to Mifare technology and trademarks for an eight year period, “on terms that are at least as advantageous as those available” today.
The EC was also concerned the merged entity would have had the ability and incentive to degrade the interoperability of Qualcomm’s baseband chipsets and NXP’s NFC and secure element chips with rivals’ products. In addition, the EC said it held reservations about the larger IP portfolio which will be held by the merged entity, including standard and non-standard essential patents related to NFC chips.
Qualcomm committed to providing “the same level of interoperability between its own baseband chipset and the NFC and SE products it acquires from NXP with the corresponding products of other companies” for eight years to address the concern.
In addition, Qualcomm agreed not to acquire NXP’s standard essential patents, as well some non-essential patents, for NFC. NXP will, instead, transfer those patents to a third party, which will “be bound to grant worldwide royalty-free licences to these patents for three years”.
Qualcomm will still acquire certain other NXP non-standard essential patents, although it is obliged to offer royalty-free licences to others for use of those particular patents.
The EC added its investigation did not confirm whether the tie-up would raise competition concerns in the markets for semiconductors used in the automotive sector.
Shareholder concerns remain
While securing clearance from the majority of regulators is an important step in Qualcomm’s bid to merge with NXP, there are still doubts over the deal because of shareholder opposition.
This week, NXP’s minority shareholder Ramius Advisors followed activist investor Elliot Management in opposing the deal. Both companies argue Qualcomm’s bid undervalues NXP.
Qualcomm, itself, is also currently fending off a takeover bid from Broadcom.