FILE - In this Nov. 2, 2011, file photo, a sign sits atop the Qualcomm headquarters building in San ...

Qual-lateral damage

 

Qualcomm announced in October 2016 that it would acquire NXP for $47 billion. However, the company is still awaiting China’s approval of the deal. Because of this, Qualcomm has decided to pull out of the acquisition.

The tech firm does not believe that China will accept the merger, so it has decided to scrap the deal altogether instead of extending the fight. China had to make a decision regarding the merger by midnight Wednesday night, but the country failed to do so. Consequently, Qualcomm will have to pay a $2 billion severance fee.

Qualcomm CEO Steve Mollenkopf explained:

“We intend to terminate our purchase agreement to acquire NXP when the agreement expires at the end of the day today, pending any new material developments.”

This deal is the latest blow for Qualcomm, a company who has been through the M&A ringer recently. Earlier this year, U.S. President Donald Trump blocked Broadcom’s acquisition of Qualcomm. A month after this development, Trump banned ZTE from buying American tech companies’ products, which crushed Qualcomm. After Trump lifted the ban on ZTE, Qualcomm was hopeful that China would allow it to acquire NXP, but that was not the case.

Qualcomm’s stock has been extremely volatile over the past twelve months. It rose as high as $68.91 and fell to $49.94 just six months later. However, on Thursday, Qualcomm’s stock jumped over six percent. This likely stems from the fact that Qualcomm has much more cash to develop different arms of its company.

In the end, the lack of approval from China may prove to work to Qualcomm’s advantage.

 

Featured Image via KPBS