Drexel Hamilton Not Fans of Rumored NXP (NXPI) Takeover Price, Says $40-$45B Should Be Minimum

Drexel Hamilton analyst Cody Acree weighed in on NXP Semiconductors NV (NASDAQ: NXPI) amid reports Qualcomm (NASDAQ: QCOM) is looking to acquire the company. Acree said NXP doesn't need Qualcomm and they are not fans of the reported $30 billion takeover price. The analyst said $40-$45 billion is the minimum that should be even considered.

Acree commented, "While we see some potential positives of a Qualcomm/NXP combination, we believe the vast majority of the benefits would be to Qualcomm and its shareholders, particularly at the discussed valuation. We believe NXP and its investors are better off looking for a much higher bid elsewhere from a more strategic partner, or simply letting the strengths of its recent Freescale merger continue to mature, which is the option that we believe should ultimately earn shareholders the maximum returns."

He added, "We Believe $40-$45 Billion is the Minimum that Should Even Begin to be Considered - In our view the discussed $30 billion would significantly undervalue NXP and its earnings power, and with NXP’s shares already trading with a $35 billion market cap, it looks as though the market agrees."

The analyst added that at least an upper-teen forward EPS multiple should be achievable. "Even at 17-19x our FY17 EPS Estimate of about $7, we get a market cap range of $40-$45 Billion," he said.

Further, he said the public discussion should draw out other bidders. Broadcom (NASDAQ: AVGO) and Texas Instruments (NYSE: TXN) would be at the top of their list, but China shouldn't be ruled out.

The firm maintained a Buy rating and price target of $115.

For an analyst ratings summary and ratings history on NXP Semiconductors NV click here. For more ratings news on NXP Semiconductors NV click here.

Shares of NXP Semiconductors NV closed at $96.12 yesterday.

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