(Bloomberg) -- NXP Semiconductors NV is set to buy back $5 billion of shares as U.S. suitor Qualcomm Inc. withdrew its $44 billion bid amid a failure to receive regulatory approval from China in time.
The Dutch chipmaker, which drew Qualcomm’s interest thanks to its links to the lucrative automotive sector, will receive $2 billion in termination compensation on July 26. NXP will expand on its strategy as a standalone company during an upcoming analyst day in New York City.
Shares of Eindhoven, Netherlands-based NXP tumbled 7.2 percent to $91.26 in pre-market trading. San Diego-based Qualcomm jumped about 5.1 percent. Qualcomm had been offering $127.50 per share for NXP.
Richard Clemmer, NXP’s Chief Executive Officer, said in a statement it was "unfortunate" that the deal could not close after 21 months of "diligent efforts".
The takeover, unveiled almost two years ago in October 2016, may be the highest profile victim yet of the trade spat between China and the U.S., with every other jurisdiction in the world long since clearing the bid. Qualcomm had until midnight in New York on July 25 to get sign-off from regulators, who have delayed approval for months. China said the deal has nothing to do with trade tensions.
NXP, which started life as Koninklijke Philips NV’s chip unit, made the comments while reporting second-quarter earnings on Thursday. The company expects a 9 percent increase in revenue for the third quarter at $2.5 billion compared to the second quarter. Analysts expect $2.46 billion on average, according to data compiled by Bloomberg.
Operating income is expected to rise to as much as $208 million, with a operating margin increasing to up to 8.3 percent, NXP said.
Second-Quarter Key facts:
- NXP 2Q revenue up 4% year on year to $2.29 billion
- NXP operating income $137 million, an increase of 174%
- NXP operating margin increased from 2.3% to 6% year on year
- Margin was boosted thanks to better fall-through on higher revenue as well as lower expenses related to purchase price accounting
- HPMS segment revenue was $2.19 billion, up 5% year on year
- Within Automotive group, revenue rose 7% on year to $1,008 million
- Secure Connected Devices group reported $644 million revenue, up 10 percent year on year
- Secure Interface and Infrastructure group saw revenue at $398 million, down 9 percent year
- Secure Identification Solutions group’s revenue rose 7% to $143 million due to growth in the mobility and retail market.
- U.S. Commerce Department ban on product shipments to ZTE negatively impacted the sale of RF Power and Digital Networking products
(Updates with NXP earnings from sixth paragraph.)
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