Chinese regulators resume review of Qualcomm/NXP merger

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REUTERS/Mike Blake/Files

(Reuters) – NXP Semiconductors’s shares jumped as much as 11.7% on Monday after a report that China has resumed review of US chipmaker Qualcomm’s proposed $44 billion buyout of the Dutch semiconductor company.

China’s commerce ministry has been asked to speed up the review of the deal and Qualcomm’s proposed remedies to protect local companies, Bloomberg reported, citing people familiar with the matter.

The report said local firms are concerned that the deal would extend Qualcomm’s patent licensing business into areas such as mobile payments and autonomous driving.

Shares of Qualcomm rose as much as 4.7% in early trading.

The US chipmaker, which announced its bid for NXP in October 2016, raised it in February to $127.50 per share and in return received binding agreements from nine NXP stockholders including hedge funds Elliott Advisors (UK) Ltd and Soroban Capital Partners LP, who had led the opposition to the deal.

Clinching the biggest deal in the semiconductor sector is crucial to Qualcomm, which is seeking to diversify its customer base and become the leading chip supplier to the fast-growing automotive market.

Qualcomm has already received approval from eight of the nine required global regulators to finalise the acquisition. Chinese clearance is the only one pending, with regulators continually stalling the takeover amid US-China trade tensions.

In April, Qualcomm refiled its application for the deal, giving regulators more time to decide.

The Chinese commerce ministry later that month said Qualcomm needs to do more to complete the takeover as the US company’s initial set of remedies to resolve competition issues were insufficient.

Analysts expect the deal to get approval after President Donald Trump on Sunday pledged to help ZTE get “back into business” and save Chinese jobs after a US ban hurt the Chinese telecom equipment maker.

“The most ‘logical’ thing for China to do was to [eventually] approve the deal, but to extract as much as possible out of Qualcomm in the process,” Bernstein analyst Stacy Rasgon wrote in a client note.

Approval of the deal is not definite and still could be delayed, the Bloomberg report said, citing the sources.

“Should this happen it would benefit Lumentum, Qualcomm, NXP and Marvell Technology,” analyst Jun Zhang of Rosenblatt Securities said.

Lumentum’s $1.7 billion bid to buy optical components producer Oclaro and chipmaker Marvell’s bid to acquire Cavium in a $6 billion deal are also awaiting Chinese antitrust approval.

The Bloomberg report did not say who asked the ministry to speed up the review, or what Qualcomm has proposed.

“With regard to matters related to the proposed acquisition of NXP by Qualcomm, we encourage you to get in touch with Qualcomm,” NXP said in an email.

Qualcomm declined to comment.

(By Arjun Panchadar; Reporting by Beijing Monitoring Desk and Arjun Panchadar in Bengaluru; Editing by Saumyadeb Chakrabarty and Arun Koyyur)

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