Brooke Sutherland is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News.

Qualcomm Inc. can't kick the can down the road forever.

The semiconductor maker on Thursday announced it was extending its tender offer for NXP Semiconductors NV to Sept. 22, marking at least the eighth such postponement since the exchange was commenced in November. It's not unusual for mergers subject to tough regulatory scrutiny like this one to require multiple extensions. But in this case, there's something else dragging things out: Qualcomm keeps offering NXP shareholders the same price of $110 a share. By now, it should be obvious that's not going to cut it.

Elliott Management Corp. has been the most public critic of the bid, but it's far from the only shareholder holding out for more. Acceptance of Qualcomm's tender offer has been shrinking now for months. As of March, about 17 percent of NXP holders had agreed to hand over their shares. By Wednesday evening, just 6.9 percent were still willing to do so, down from 7.6 percent as of July 26. Shares of NXP are now trading about 2 percent above Qualcomm's offer price.

Losing Momentum
Qualcomm needs 80 percent of NXP holders to tender their shares. It's got a ways to go.
Source: Bloomberg

As I've noted before, dissenters have a valid argument for a raised bid. Qualcomm's offer now values NXP at about $41 billion after adjusting for the target's reduced debt load, or about 13 times its projected 2017 Ebitda. That's a discount to the median valuation for semiconductor device makers of more than $5 billion, most of which haven't received a takeover premium. Linear Technology Corp., a chipmaker with a similar growth profile to NXP, commanded nearly 18 times forward Ebitda when it agreed to sell itself to Analog Devices Inc. last year.

A Tale of Two Chipmakers
NXP shares have been lifted since the deal's announcement amid a strong earnings and margin performance, while Qualcomm has been dragged down by legal and regulatory woes
Source: Bloomberg

Qualcomm needs this deal more than NXP does. The downtrodden profit forecast the chipmaker delivered in July showed just how vulnerable it is to an erosion of its licensing business, which has been mired in regulatory inquiries and a dispute with Apple Inc. An influx of automotive-chip based revenue would go a long way. By contrast, Elliott is reportedly happy to have NXP continue on as a stand-alone rather than accept the current offer price.

I can't think that Qualcomm has just changed its mind about the acquisition, and Bloomberg data shows it can afford a higher price. Perhaps it's just biding its time, playing a game of chicken with investors to see how many will side with Elliott. But someone eventually has to blink. And it's not likely to be Elliott. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. Notably, Dan Loeb's Third Point has built a position in NXP, while Pentwater Capital Management, which often bets on corporate transactions, has increased its stake. 

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Brooke Sutherland in New York at

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Beth Williams at