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Questions about Mergers transacted through a Tender Offer

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I'm the owner of some number of shares of NXPI.  They are the subject of a Tender Offer by QCOM.

Question 1:  In general, why?  Most M&A activity (example, when NXPI acquired FSL) does not involve a Tender Offer, but a straight-up vote by the shareholders of the company, followed by direct acquisition of all shares. 

There's a lot of noise of late that the NXPI Tender Offer price of 110 is too low, and every month when QCOM extends the offer, the number and percentage of shares considered "validly tendered" drops.  Latest report was 7.6% tendered.  Today, NXPI has spent most of the morning trading OVER the $110 tender offer price.

My shares are validly tendered.

Question 2:  Should I leave them in, or should I pull them out?  Is there risk that if QCOM should raise the offer price that they'd still take mine at the original offer price?  My shares represent such a small fraction as to yield virtually zero leverage.  However, I don't want to only get $110/share if the tender price goes up.

(I believe the current trigger is 80% tendered -- after all relevent governmental bodies approve the transaction.  US and Taiwan have approved; PRC and euro-zone have yet to approve.)

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rated:
Generally, avoid tendering until the deal is a certainty. You can gauge that by reviewing the percent tendered in the updates usually announced by the companies on the status of the tender.

In the case of NXPI, there is some belief that it is worth more on it's own and to QCOM. IDK about that.

One alternative is to just sell your shares in the open market. Today, NXPI is trading above the $110 offer from QCOM.

rated:
If you think it's worth more than $110, pull them and sell if you like the higher market price.  I can't see any reason to tender thinking the deal would go through consistent with not wanting to sell for equal or more if you could.

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Why would you tender it? NXPI is trading over $110 .. like around $110.20 today. If you want $110 - just sell it at market price now. Why bother tendering it slightly below market price?

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FWIW the market is expecting a slightly better deal, maybe another $5-10 if you're lucky.

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Everyone gets the same price in the tender offer (it's called the "best price rule")

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xerty said:   FWIW the market is expecting a slightly better deal, maybe another $5-10 if you're lucky.
I think it will happen. When Qcom made the offer for NXPI, it was a very decent offer. However, since then, all the tech stocks have zoomed up 20 to 30% whereas Qcom is sitting on its b_u_tt and the shareholders are basically getting sh_af_ted. The big institutional investors know that they if don't submit their shares, the deal will fall apart and NXPI will zoom to reflect the new trading multiples [provided NXPI does not mess up the earnings]. I am hanging on to my shares.

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I'm not particularly interested in selling NXPI at the moment. I just want to ensure that if the merger occurs, that I won't be shorted. Given my situation, it seems appropriate to leave my shares in-tender...thereby avoiding the risk of missing the actual tender execution.

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micha8s said:   I'm the owner of some number of shares of NXPI.  They are the subject of a Tender Offer by QCOM.

Question 1:  In general, why?  Most M&A activity (example, when NXPI acquired FSL) does not involve a Tender Offer, but a straight-up vote by the shareholders of the company, followed by direct acquisition of all shares. 

 

  Aren't tender offers generally hostile bids for a company that doesn't want to be acquired?

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yanks0114 said:   Everyone gets the same price in the tender offer (it's called the "best price rule")
You learn something new every day. Here's a little on that SEC rule:

https://www.mofo.com/resources/publications/sec-amends-tender-of...
https://m.lw.com/thoughtLeadership/amended-best-price-rule-revit...

Companies can still offer coercive tenders - ie take $110 now but if we get a majority without you, we're only paying the holdouts $100 and forcibly squeezing them out via a merger or the like. Those aren't very common (and in many you could sue for fair value if you had appraisal rights, but if you don't have enough shares to hire a lawyer for that, you should have taken the first deal), nor are ones with a range where you bid a price and you get the price you bid instead instead of the highest clearing price for the Dutch auction, but they do happen occasionally, but perhaps moreso in foreign markets or non-stock instruments.

In this case, as in any case, if you own the stock you should read the offer details to be sure. Here is the original terms:

https://www.sec.gov/Archives/edgar/data/804328/00011931251677149...

you should probably check the half a dozen amendments since then to make sure they're nothing substantive in terms of what matters.
Glitch99 said:   
Question 1:  In general, why?  Most M&A activity (example, when NXPI acquired FSL) does not involve a Tender Offer, but a straight-up vote by the shareholders of the company, followed by direct acquisition of all shares. 
  Aren't tender offers generally hostile bids for a company that doesn't want to be acquired?

Mergers are sometimes more easily effected via voluntary tender offers as a first step. This can either be because they acquirer is willing to take less than all the shares (compared to a merger where they might buy none if the vote fails), or because of foreign company rules that have longer delays or bad tax treatments on mergers, etc. Generally tenders are much faster than mergers since they don't require regulatory reviews so the timeframe is half a dozen weeks typically instead of that many months.

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Glitch99, in the case of QCOM taking NXPI, it is not at all a hostile takeover. The discussions started as QCOM exploring buying a division of NXPI, but then morphed into QCOM buying the whole company. In October of last year, the merger was announced, and the announcement states that both boards of directors approved the merger unanimously. In January, NXP shareholders voted overwhelmingly to approve the merger (>95% approval says the press release).

From what I remember, reading the shareholder material 6 months ago, there's the tender offer (which they keep re-upping month-to-month). The merger can occur at 70%, 80%, or 95% shares tendered, depending upon other conditions. Once Qualcomm purchases the bulk of the shares, there will be a quick second tender; those who didn't make the deadline can get the same $110 deal. THEN, any shares that fail to tender in time for the second offer end up getting taken to a Dutch court (NXP is incorporated in the Netherlands), and those people will get whatever price the court deems fair, after some sort of Dutch capital gains tax is paid.

I'm guessing those amendments are the monthly adjustments to the tender offer deadline. Another condition of the offer is regulatory approval from several governmental entities. The original deadline for tendering was in February, and everytime the deadline has passed without complete regulatory approval, Qualcomm has extended the offer, as is, by another month.

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