Qualcomm Inc, the world’s biggest maker of chips for mobile phones, said on Wednesday it would drop its $44 billion bid for NXP Semiconductors after failing to secure regulatory approval from China against a backdrop of widening trade tensions.
“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,” Qualcomm’s chief executive officer, Steve Mollenkopf, said in a statement on Wednesday afternoon.
The statement comes after China’s State Administration for Market Regulation has been silent about the acquisition in the run-up to the deadline.
The deal agreement is to expire at 11.59pm on Wednesday New York time or 11.59am Beijing time.
He said the company would move ahead with a $30 billion stock buy-back plan rather than continue with its pursuit of NXP which has dragged on since 2016. Qualcomm still must pay the Dutch company a US$2 billion break-up fee.
Its shares were up near 6 per cent to $62.95 after the bell despite the termination of the deal supported supported by a $30 billion share buyback plan that Qualcomm had promised to implement if the NXP deal fell through as well as surprisingly strong third-quarter results and a rosy outlook for so-called 5G technology, the next generation of wireless data networks.
The collapse of what would have been the largest-ever merger of two chip companies may discourage other US firms hoping to buy into China’s huge developing markets and companies.
“We obviously got caught up in something that was above us,” Qualcomm Chief Executive Steve Mollenkopf said in an interview after the announcement.
“We think moving on, reducing the amount of uncertainty in the business and increasing the focus is the right thing to do with the company.”
Qualcomm first announced the deal in October 2016, and eight of the nine countries where Qualcomm does business signed off on the deal, leaving China the only obstacle.
The acquisition was considered strategically important as the US and China are both racing to dominate 5G technology, the next stage for telecommunications networks.