A $44 billion tech deal that just collapsed is perhaps the biggest example yet of the harm Trump's trade war can do

  • Qualcomm’s proposed $US44 billion acquisition of NXP Semiconductors collapsed on Thursday – more than two years after it was first announced.
  • The deal fell apart after Chinese regulators let the deadline for approval pass without signing off.
  • While China says its lack of approval doesn’t stem from acrimony from mounting trade conflicts with the US, the CEOs of both Qualcomm and NXP have other ideas.

Qualcomm‘s proposed $US44 billion acquisition of NXP Semiconductors hung in limbo for months, awaiting regulatory approval from China, the lone holdout.

Then President Donald Trump’s trade war took the world by storm.

As tensions between the US and China escalated over a series of months, any sort of cooperation that might’ve previously been expected fell by the wayside. In the end, Qualcomm’s mega-merger – which would have been the biggest semiconductor deal in history – seems to be collateral damage, as Chinese regulators let the approval deadline pass without signing off.

But if trade conflict was the primary driver behind China’s failure to approve the deal, it’s not letting on. Gao Feng, the nation’s commerce ministry spokesman, said in a briefing early Thursday that the decision to let the deadline pass was about market monopoly, not trade.

Qualcomm CEO Steve Mollenkopf doesn’t sound so convinced.

“There were probably bigger forces at play here than just us,” he said in an interview prior to the deadline. “We are still fans of the deal and the logic behind the deal.”

Richard Clemmer, the CEO of NXP, was more pointed with his criticism of the deal’s collapse, calling it a “purely political decision.” He also said there was “no legal or power issue that prevented the transaction.”

Now both companies are left to pick up the pieces of their failed merger. Qualcomm is on the hook for the $US2 billion termination fee that was previously agreed upon. In order to assuage the situation with investors, the company authorised a $US30 billion share buyback program. The chip maker’s stock climbed 4.3% on Thursday amid the news.

Where Qualcomm goes next is less clear, with the prospect of global M&A in the crucial Chinese market significantly dampened by the failed NXP deal.

“Our core strategy of driving Qualcomm technologies into higher growth industries remains unchanged,” Qualcomm CEO Steve Mollenkopf said in a statement. “We will continue to focus on our strong momentum in these growth industries.”

NXP CEO Clemmer is already pumping the breaks on speculation of another merger, saying “uncertainty will keep us from doing such a deal in the near future.” The company did say it will repurchase $US5 billion of shares, and plans to unveil a new strategy at a September 11 analyst day in New York.

Traders were less forgiving when it came to NXP, pushing its shares down more than 5% on Thursday. Prior to the deal collapse, the company’s stock had climbed more than 60% since February 2016.

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