Viking Global and NXP Semiconductors
Viking Global Investors started a new position in NXP Semiconductors (NXPI). The fund bought 5,411,595 NXP shares. The shares were worth $413 million. According to the latest 13F filings for 4Q14, it accounted for 1.90% of its total portfolio.
About NXP Semiconductors
NXP Semiconductors NV (NXPI) is based in the Netherlands. It’s a global semiconductor company. It’s a long-standing supplier in the industry.
It sells two categories of products:
- High Performance Mixed Signal solutions
- Standard Products
The first category consists of highly differentiated application-specific high performance mixed signal semiconductors and system solutions. It accounted for 76% of the company’s total product revenue in 2013. The products are used in the areas of RF (radio frequency), analog, power management, interface, security technologies, and digital processing.
NXP’s solutions are used in a wide range of applications like automotive, identification, wireless infrastructure, lighting, industrial, mobile, consumer, and computing. The company deals with OEMs (original equipment manufacturers) worldwide. In 2013, 64% of its revenue was derived from Asia-Pacific—excluding Japan.
NXP and Freescale announce $40 billion merger
In February 2015, NXP and its semiconductor peer Freescale announced their plans to merge. The merger will create a new entity worth $40 billion. The combined revenue will exceed$10 billion annually.
The merger expects to create a “market leader in the automotive semiconductor segment.” Under the terms of the transaction, Freescale will receive $6.25 in cash and 0.3521 of an NXP common share for every Freescale share held. The total acquisition price for Freescale is ~$11.8 billion.
Under a merger arbitrage, the investor will generally buy the stock of the company being acquired, sell short the relevant ratio of the acquirer’s stock—if applicable, and wait for the deal to close. When the merger is completed, the investor will exchange the stock of the company being acquired for the deal consideration.
To view an an arbitrageur’s take on the deal, read The Freescale–NXP merger: A large deal in the semiconductor space.
NXP’s 4Q14 results beat estimates
In February 2015, NXP declared its 4Q14 results. It reported revenue of $1.537 billion. This was a 19% increase compared to the same period in 2013. The EPS (earnings per share) was also up 36% on a year-over-year, or YoY, basis at $1.35. The results exceeded analysts’ expectations.
One of the main reasons for the rise in quarterly earnings was because NXP supplies chips to Apple’s (AAPL) iPhone 6. Apple also reported record sales in 4Q14. NXP also has a joint venture with Taiwan Semiconductor (TSM). It also reported earnings growth.
NXP has a 0.45% exposure to the PowerShares QQQ (QQQ). Apple has a 14.89% exposure to QQQ. The ETF tracks the overall performance of 107 publicly traded companies in the technology sector.
Taiwan Semiconductor has a 15.01% exposure to the SPDR Nuveen Barclays ST Muni Bd ETF (SHM). The ETF tracks the overall performance of 26 publicly traded companies in the technology sector.
In the next part of this series, we’ll discuss Viking Global’s position in Crown Castle International.