ValueMaven Posted January 26, 2018 Share Posted January 26, 2018 Creating this as this is a very interesting merger arb deal in the tech space... NXPI is in the process of being acquired by QCOM for $110 per share, QCOM itself is in the process of fighting off a take-over battle from AVGO. NXPI is a leader in the semiconductor space for industrials and autos. The acquisition was a brilliant on QCOM’s case, but many, many shareholders are holding out for much more. The $110 per share low-balls NXPI both on a standalone valuation perspective, regardless of any control premium being applied. You have several well know activists really pushing QCOM for a much higher price. QCOM was forced to extend the tenor offer several times already…and the deal was again extended today into April. A few things can happen here, but I think if QCOM walks away the stock rallies to peer multiples plus…or you can have another acquiring firm. I’ve attached some of the work Elliott Management has done on the name. FYI I have a modest size position on at around $120 jan19_nxp_shareholderletter.pdfjan19_nxp_ubsfinancialanalysis.pdfdec11_nxp_presentation.pdf Link to comment Share on other sites More sharing options...
ValueMaven Posted January 27, 2018 Author Share Posted January 27, 2018 If QCOM wants NXPI they are going to have to make a higher bid...hardly anyone has tendered into the deal... If the deal breaks the stock rallies... Link to comment Share on other sites More sharing options...
ValueMaven Posted January 31, 2018 Author Share Posted January 31, 2018 https://www.bloomberg.com/news/articles/2018-01-29/qualcomm-s-need-to-up-nxp-offer-gets-real-as-broadcom-bid-looms Link to comment Share on other sites More sharing options...
zippy1 Posted February 20, 2018 Share Posted February 20, 2018 https://finance.yahoo.com/news/qualcomm-raise-offer-buy-nxp-111552181.html Qualcomm raises offer for NXP, Elliott backs new bid U.S. chipmaker Qualcomm Inc raised its offer to buy NXP Semiconductors NV to $127.50 per share on Tuesday, and said it now has the backing of the shareholder group led by Elliott Management that opposed the previous proposal. Qualcomm said it needs to buy a minimum 70 percent of NXP's outstanding shares in a tender offer, instead of the 80 percent required in the earlier agreement. The latest offer values NXP at $44 billion. NXP's shares were up 6.5 percent at $126.15 in premarket trading. The stock has traded above the original offer price for nearly seven months as investors expected a revised offer. The buyout of NXP will help Qualcomm, which provides chips to Android smartphone makers and Apple Inc, to expand in the fast-growing market for chips used in automobiles and reduce its dependence on a cooling smartphone market. A deal will also bolster its defence against a hostile takeover attempt by Broadcom Ltd, which has said its $121 billion offer is contingent on either Qualcomm buying NXP at $110 per share or the deal being terminated. Qualcomm said on Tuesday it had entered into agreements with nine NXP stockholders, who collectively own more than 28 percent of NXP, including top shareholder Soroban Capital Partners LP and second-largest Elliott. Activist hedge fund Elliott, which had resisted Qualcomm's previous $110 per share offer saying it undervalued NXP, said it was pleased that NXP's value had been recognised in the revised transaction terms. Qualcomm has also extended its tender offer for NXP until March 5, a day before its shareholder meeting when Broadcom's slate of directors is also up for vote. Qualcomm had resisted increasing the offer price and last month said it would boost its buyback as an alternative to buying NXP. "Our preference is to close NXP, but not at all costs," Qualcomm Chief Financial Officer George Davis said on a post-earnings conference call in January. Link to comment Share on other sites More sharing options...
ValueMaven Posted February 21, 2018 Author Share Posted February 21, 2018 Yes, this was a very decent trade actually, with a nice IRR. I am out. 'Give a man a fish, and you feed him for a day. Teach him how to arbitrage and you feed him forever.' -WEB 1989 Sincerely, ValueMaven Link to comment Share on other sites More sharing options...
zippy1 Posted February 21, 2018 Share Posted February 21, 2018 Yes, this was a very decent trade actually, with a nice IRR. I am out. 'Give a man a fish, and you feed him for a day. Teach him how to arbitrage and you feed him forever.' -WEB 1989 Sincerely, ValueMaven ValueMaven, Really need to thank you for bringing up this idea! I got in around 121 and am out also. I am very interested in your view on Qualcomm's itself now. Again, thanks a lot for this idea. best regards, Zippy Link to comment Share on other sites More sharing options...
peterHK Posted April 25, 2018 Share Posted April 25, 2018 This is very good value now that the deal has fallen apart. I suspect M&A arb funds have sold out and now we have a company trading at 10x EV/EBITDA while peers trade at 13-14x. Also a lot of the digital names have traded down, but analog feeds into different markets and TXN's results confirmed that today, so I think the market has made a mistake selling off analog and digital names together. By my math: $2bn break fee $2bn + in FCF this year 1x EBITDA of leverage = ~$4bn Gets you to $8bn in cash they can tap, or 20% of the market cap. If they buy back 20% of shares O/S, that takes EPS from ~$7.50 this year to $9. Slap a 14x multiple on that and you get a $126 stock. I expect Elliot will press for something to happen if they don't sell out first. Long run growth drivers intact (increased tech content in everything), this should be able to do 4-6% topline and 10%+ EPS growth over the next decade. Link to comment Share on other sites More sharing options...
ValueMaven Posted April 25, 2018 Author Share Posted April 25, 2018 Yes...wait till the deal breaks however. I am with you on the analysis. I think it goes below $100... I am actively watching this one! Link to comment Share on other sites More sharing options...
peterHK Posted April 26, 2018 Share Posted April 26, 2018 Yes...wait till the deal breaks however. I am with you on the analysis. I think it goes below $100... I am actively watching this one! Might go below $100, might not. My sense is that a lot of arb funds have sold out and I don't believe you can predict short term movements. Like I said, I expect Q1 will be good, so that might cause a pop in the shares in which case you might wish you'd bought earlier. Link to comment Share on other sites More sharing options...
ValueMaven Posted April 30, 2018 Author Share Posted April 30, 2018 Agree w/you actually. I started loading up today on this one...really interesting situation! Link to comment Share on other sites More sharing options...
ValueMaven Posted May 7, 2018 Author Share Posted May 7, 2018 Maybe I am missing something here...BUT to me this is a very, very easy lay-up. The whole sector is on FIRE, the market is pricing this thing as if the QCOM deal is already broken. Let's not forget, NXPI will receive $2bn of CASH from QCOM if/once the deal breaks. Management hasnt provided any guidance in the latest quarterly release, but I see a lot of upside. In my own view this is as close to a win-win as possible. I bet all of those merger-arb Fund's have gotten crushed recently in the name... IMHO this is a 30% IRR+ over the next 12M Link to comment Share on other sites More sharing options...
given2invest Posted May 8, 2018 Share Posted May 8, 2018 Maybe I am missing something here...BUT to me this is a very, very easy lay-up. The whole sector is on FIRE, the market is pricing this thing as if the QCOM deal is already broken. Let's not forget, NXPI will receive $2bn of CASH from QCOM if/once the deal breaks. Management hasnt provided any guidance in the latest quarterly release, but I see a lot of upside. In my own view this is as close to a win-win as possible. I bet all of those merger-arb Fund's have gotten crushed recently in the name... IMHO this is a 30% IRR+ over the next 12M You have basically gotten it right...this is good here. I bought on the earnings blowup. It's a lotto ticket the china trade thing gets fixed by July (unlikely) but even if not - stock is higher in the next 3-6 months. Probably much higher. Link to comment Share on other sites More sharing options...
peterHK Posted May 9, 2018 Share Posted May 9, 2018 Probably 30%+ IRR over the next 12 months (barring a recession), but I think long term with potential for 4-6% topline growth and 10-12% EPS growth, you're looking at a 10-15% IRR over the next decade, which is far more valuable than a quick win. The real beauty of this is that you can buy into the long term story with a huge margin of safety and many ways to win. Link to comment Share on other sites More sharing options...
ValueMaven Posted May 10, 2018 Author Share Posted May 10, 2018 From QCOM this evening: Chief Executive Steve Mollenkopf said the new authorization would "enable our continued anti-dilutive share repurchases,” adding that it would "provide flexibility for potential additional repurchases, as we execute on our proposed acquisition of NXP,” Link to comment Share on other sites More sharing options...
Lakesider Posted May 10, 2018 Share Posted May 10, 2018 From QCOM this evening: Chief Executive Steve Mollenkopf said the new authorization would "enable our continued anti-dilutive share repurchases,” adding that it would "provide flexibility for potential additional repurchases, as we execute on our proposed acquisition of NXP,” Flexibility in case the merger is declined and they are sitting on a boatload of cash? What are you reading from that statement? Link to comment Share on other sites More sharing options...
ValueMaven Posted May 10, 2018 Author Share Posted May 10, 2018 Deal fails they pay NXPI $2bn...so we will see either way. I still believe its a win-win at this point Link to comment Share on other sites More sharing options...
peterHK Posted May 11, 2018 Share Posted May 11, 2018 I called them and talked to their IR about doing a buyback, so interesting they speak out about it now. Also, on the CEO selling most of his stock. He had a 10 year tax holiday that expired last year, so he was going to sell it anyway. That doesn't bug me as he had a huge holding, but what I want to see is him buying it back at these lower prices. Link to comment Share on other sites More sharing options...
Lakesider Posted May 13, 2018 Share Posted May 13, 2018 https://www.reuters.com/article/uk-usa-china-zte/in-concession-trump-will-help-chinas-zte-get-back-into-business-idUSKCN1IE0QI I see this as potentially a positive sign towards Qualcomm deal approval. Qcom spend alot lobbying Washington. Maybe just wishful thinking. Link to comment Share on other sites More sharing options...
ValueMaven Posted May 13, 2018 Author Share Posted May 13, 2018 Yes - it is nice to see...I still think the deal happens actually, and that the market is massively mispricing this one. NXPI is my largest holding by far at this point. Let's not forget the whole semis space is on FIRE, and the valuation w/NXPI is dirt cheap. Even if the deal breaks, I still think it goes higher.... Link to comment Share on other sites More sharing options...
ValueMaven Posted May 13, 2018 Author Share Posted May 13, 2018 also, Elliott has been DEAD silent here...I find that very odd given how large of a position it is for them, and how vocal they were. Link to comment Share on other sites More sharing options...
given2invest Posted May 14, 2018 Share Posted May 14, 2018 Boom...China re-starting review... Lotto ticket went from Powerball to pick 3... Link to comment Share on other sites More sharing options...
Lakesider Posted May 14, 2018 Share Posted May 14, 2018 I actually think approval could be quite likely. The speed that the announcement came after trumps ZTE move suggest to me that the actions are directly related. Trump helping china could be dependent on approval. Maybe wishful thinking again :P Link to comment Share on other sites More sharing options...
peterHK Posted May 15, 2018 Share Posted May 15, 2018 I think people place way too much emphasis on the deal. It's a nice short term catalyst, but I think investors are better served focusing on what might happen if the deal fails, and that's why I think NXPI makes sense: they have so much BS firepower and a good long term outlook that it's hard to lose here if your time horizon is 3+ years. Link to comment Share on other sites More sharing options...
Lakesider Posted May 20, 2018 Share Posted May 20, 2018 https://www.reuters.com/article/us-china-qualcomm-antitrust-nxp-semicond/beijing-official-says-qualcomm-nxp-deal-looking-more-optimistic-wsj-idUSKCN1IJ24H Link to comment Share on other sites More sharing options...
given2invest Posted May 21, 2018 Share Posted May 21, 2018 Yes, that's why it went up on Friday. With this weekend's news of the trade war on hold it will be up another $5+ tomorrow is my guess. This deal is going through. My guess is China approves in the next couple weeks though they might delay till end of June to keep leverage over a final agreement. I'm not even sure there will be a final agreement by the time the drop dead date comes in July which leads me to believe that the risk a trade war is "back on" before this is approved is low. But what do I know. I will hold till it closes but I think fair value today is b/w 117 and 120. Link to comment Share on other sites More sharing options...
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