China’s expressed regret over Qualcomm Inc.’s decision to scrap a $44 billion takeover of NXP Semiconductors NV, an apparent attempt to avoid blame after regulators failed to rule on what would have been the largest chip acquisition in history.
The takeover fell apart as tensions between China and the US escalated and local regulators held off on clearing the deal — months after every other relevant jurisdiction in the world had green-lit the bid.
The State Administration for Market Regulation said it’d given Qualcomm feedback on the deal but the company failed to address its concerns. The Chinese agency added it was extending its review, despite declarations from both Qualcomm and NXP that the deal was dead.
The abortive takeover became the highest-profile victim of a dispute between the world’s two largest economies about their ballooning trade imbalance, a spat fuelled by concerns about China’s ascendancy. By allowing Qualcomm’s deal to run itself out, Beijing is flexing its economic muscles while retaining negotiating power with a Trump administration that’s threatened to slap tariffs on virtually all Chinese goods.
“This is very classic Beijing strategy,” said Isaac Stone Fish, a senior fellow at the Asia Society’s Center on US-China Relations. “It gives them somewhat plausible deniability, when they’re having this conversation. They could say, oh yeah, we didn’t have enough information from Qualcomm.”
While Beijing’s denied that its review had anything to do with the trade spat, Qualcomm CEO Steve Mollenkopf said “there were probably bigger forces at play here than just us.” The US company referred questions about the latest Chinese comments back to an earlier statement that said the acquisition had been terminated.
“It allows them to say, listen, we’re blameless on this, you guys have to make other concessions,” Stone Fish told Bloomberg Television.
Chinese regulators said their deadline for a Qualcomm review is August 15, with an extended deadline of October 14. The agency added it still hopes to find solutions for the deal. The country’s approval was needed because it’s the world’s single largest consumer of semiconductors and automobiles, markets in which both Qualcomm and NXP are important operators.
The statement from Chinese authorities represents yet another twist in a tortuous process that ended when Qualcomm failed to gain approval for its proposed acquisition before a July 25 deadline.
When the transaction was announced in October 2016, Qualcomm assured investors that approval would come by the end of 2017. The deal then got caught up in Broadcom Inc.’s failed hostile takeover attempt of Qualcomm, and was targeted by activist investors who piled into NXP’s stock, demanding a higher price.
To win those investors over and thwart Broadcom’s approach, Qualcomm raised its offer price for NXP. In April, the two companies extended their agreement to the deadline as Qualcomm worked out concessions with China.
In an interview on CNBC earlier, Mollenkopf was asked why he didn’t wait longer for approval. “We thought it was important to bring certainty to the process, move on and really focus on the things that we said are going to drive value,” he said.