Qualcomm (QCOM) and NXP Semiconductors (NXPI) have agreed to a deal that would see a subsidiary of Qualcomm acquire NXP for $110 a share in cash. The structure of the deal will allow Qualcomm to use its offshore cash reserves to help fund the deal, which is expected to close at the end of 2017. At a price of $110 a share Qualcomm is paying a relatively modest 13 times consensus 2018 earnings per share for NXP. (Qualcomm currently trades at a trailing-12-month price to earnings ratio of 20.19.) AT $110 the acquisition will be immediately accretive to Qualcomm’s non-GAAP earnings per share. The company also noted that it expects to generate $500 million in annualized run-rate cost savings within two years of the close of the deal. Wall Street analysts estimate that the combined company, with annual revenues of $30 billion, will have products with addressable markets that total $138 billion in sales by 2020 in mobile systems on a chip and modems, automotive semiconductors, and near-field solutions for mobile transactions and payments.
Qualcomm is a member of my Dividend portfolio on its 3.02% yield. The shares were up 2.77% today, October 27, on news that the long-anticipated deal had been agreed. Qualcomm is up 40.22% for 2016 as of October 27. The company will announce earnings for the September quarter on November 2
