Last week, rumors circulated that Samsung (OTC:SSNLF) wanted to buy NXP Semiconductors (NASDAQ:NXPI). This sent the stock to the $100 level after-hours. As expected, Samsung denied it was interested. Still, the acquisition of NXPI would give Samsung many benefits.
The Chinese government’s delay on permitting Qualcomm (NASDAQ:QCOM) to buy NXPI led to the break-up. NXPI used the break-up fee to buy back shares and to invest in the business. NXPI, during the merger period, ran the business as if there were no buyout. If Samsung gets NXP, it would give a technical advantage over Qualcomm in two ways.
First, Samsung would gain RF technology that would have benefited Qualcomm. Second, it does not have to pay a big premium for NXPI stock since management and shareholders may welcome the deal.
Strategically, NXP’s strong presence in the automotive sector and IoT would accelerate Samsung’s business diversification away from the slowing smartphone and tablet market. NXP is in year two of a five year plan of growing in the double digits within the automotive market.
Takeaway
A Samsung-NXPI buyout needs China’s approval. China may play nice by approving the deal because it gives its Korean neighbor a benefit while Qualcomm loses out.
Disclosure: author owns NXPI shares
