Qualcomm to Buy NXP for $39 Billion in Biggest Chip Deal

Qualcomm Inc. agreed to buy NXP Semiconductors NV for $39 billion, adding the No. 1 supplier of automotive chips, a fast-growing market, to the San Diego company best known for designing smartphone chips.

The agreement represents the biggest semiconductor deal ever, eclipsing Avago Technologies Ltd.'s pact to buy rival Broadcom Corp. for $37 billion, and behind only Dell Inc.'s $60 billion acquisition of EMC Corp. among pure tech deals.

The deal values NXP at $110 a share, which represents a 34% premium over where NXP shares traded before The Wall Street Journal reported on the talks Sept. 29.

NXP's position in the automotive-chip market was seen as a motivation for the deal because analysts say Qualcomm wants to supply its chips for self-driving cars. The combined company is expected to have annual revenue of more than $30 billion.

NXP, which became a bigger manufacturer through the purchase last year of Freescale Semiconductor, owns seven factories in five countries that turn silicon wafers into chips. Besides those plants, known as fabs, NXP operates seven facilities that package and test chips before they are sold.

Qualcomm pioneered what the semiconductor industry calls the "fabless" business model. The company's popular wireless chips, used in the smartphones of Apple Inc. and others, are mostly manufactured by Taiwan Semiconductor Manufacturing Co. and firms that build products to order for chip designers.

Analysts and industry executives say running factories requires a different set of management skills than designing chips. Those include tracking the age and performance of manufacturing equipment, overseeing a supply chain of materials and managing production workers, who are represented by labor unions in some NXP locations.

Write to George Stahl at [e-mail]

(END) Dow Jones Newswires

October 27, 2016 07:55 ET (11:55 GMT)

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