US computer chip giant Qualcomm dropped a $43 billion merger with Dutch rival NXP on Thursday, as the deal became an apparent casualty to trade tensions between Washington and Beijing. The deal was called off after antitrust authorities in China failed to approve the merger after a two-year wait. The decision ends the tie-up aimed at creating a diversified chipmaker with Qualcomm''s dominant position in smartphones and NXP''s foothold in the market for chips powering "internet of things" connected devices.
Qualcomm said it would pay NXP a $2 billion dollar breakup fee required under its agreement, and would begin a $30 billion stock repurchase plan. US Treasury Secretary Steven Mnuchin expressed disappointment that the deal fell through but sidestepped questions on whether it was related to the standoff with Beijing.
The deal "was approved in every single other territory," Mnuchin told CNBC television, adding that "we''re just looking for US companies to be treated fairly.. I think its unfortunate that that didn''t get approved after a long two-year process."
Analyst Patrick Moorhead of Moor Insights & Strategy said the merger plan was clearly a victim of the trade dispute between the US and China.
"This wasn''t an American company trying to buy a Chinese company," Moorhead said. "There were not even any protests that Qualcomm could go in and fix. To me it''s belligerent and will lead to an escalation."
The California firm ended its effort when the bid expired at 11:59 pm Eastern time (0359 GMT Thursday). In Beijing, officials denied that tensions with Washington affected the proposed merger. "The issue with the case is related to anti-monopoly law enforcement and has nothing to do with China-US trade frictions," commerce ministry spokesman Gao Feng told reporters at a weekly press briefing Thursday.
He declined further comment, referring to China''s market regulator for additional details. The deal''s collapse comes with the US set to ramp up tariffs on Chinese imports following President Donald Trump''s complaints of unfair trade. Recently the US imposed tough sanctions on Chinese tech firm ZTE that could have led to the firm''s collapse, but the Trump administration later reached a deal that helped the firm remain in business.
US Senator Marco Rubio slammed the move by China and said Washington should retaliate. Rubio tweeted that "@CommerceGov does China a favor & reverses ban on ZTE buying chips from Qualcomm. And how did China return the favor? By blocking Qualcomm deal with NXP despite the begging & pleading from @USTreasury & Commerce Dept. We should reimpose ZTE ban."
Qualcomm had extended the deadline several times for the tie-up, which would have given the dominant smartphone chipmaker firm a broader array of products including sensors and microprocessors for connected "internet of things" devices.