Qualcomm’s Failure to Acquire NXP Yields Big Payday for Stockholders

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When Qualcomm Inc. (NASDAQ: QCOM) last week withdrew its $44 billion offer to buy NXP Semiconductors after Chinese authorities failed to approve the deal, the company’s stock price rose by nearly 5% as investors anticipated a healthy share buyback. That expectation became reality Tuesday morning when Qualcomm announced a tender offer to repurchase up to $10 billion of its shares.

The buyback takes the form of a modified Dutch auction at a price of at least $60 a share and not more than $67.50 a share in cash. The offer expires at midnight E.T. on August 27, unless the company extends it. Shares closed last night at $62.04.

The tender offer is the first step in an already authorized $30 billion buyback program that Qualcomm said may include future open market transactions or accelerated share repurchase transactions. The company said it expects to transact “a substantial portion” of the program by the end of next year.

With a consensus price target of $65.90, Qualcomm’s offer looks like a pretty good deal for investors who want to cash out some or all of their shares in the company as it continues its battle with Apple over royalty payments and a virtually certain loss of its business with Apple. Intel is in line to replace Qualcomm as the supplier of cellular modem chips to Apple.

Since last week, several analysts have weighed in with ratings and price target changes. Canaccord Genuity maintained its Buy rating on Qualcomm stock and raised its price target from $75 to $81 a share, the highest level of any analyst firm. Other changes include:

  • KeyCorp: maintained Overweight rating and raised price target from $65 to $72
  • Summit Insights: raised rating from Hold to Buy
  • BMO Capital Markets: maintained Market Perform rating and raised target to $64
  • Stifel Nicolaus: maintained Hold rating and raised target price from $54 to $58
  • Cowen: maintained Market Perform rating and raised price target to $64 from $58
  • Deutsche Bank: maintained Hold rating and raised price target to $60

Qualcomm shares traded up about 2.8% in early Tuesday to $63.82, in a 52-week range of $48.56 to $69.28 (the high was posted yesterday).