(Reuters) - Activist hedge fund Elliott Management Corp launched a campaign on Thursday to convince NXP Semiconductor NV (NXPI.O) mom-and-pop investors to shoot down a $38 billion deal to sell the semiconductor company to larger peer Qualcomm Inc (QCOM.O).
The campaign involves posting glossy presentations to tens of thousands of individual NXP shareholders, as opposed to institutional investors such as mutual funds. Such mom-and-pop investors account for an estimated 11.6 percent of NXP’s shareholder base.
NXP shares ended trading on Wednesday at $120.32, significantly above Qualcomm’s $110 per share all-cash bid, indicating that most investors are betting on a sweeter offer. Elliott’s focus on individual shareholders, however, shows that the hedge fund is not willing to leave anything to chance.
Such retail shareholder-focused campaigns are known to add hundreds of thousands of dollars, even millions of dollars, to the cost of an activist shareholder campaign. Elliott declined to comment on how much it was spending on the move, which is the latest in a series of such campaigns against companies.
Last year, Elliott paid for billboards in several Australian cities to get retail shareholders on its side in a fight against miner BHP Billiton Ltd (BHP.AX) (BLT.L). It also sent out video players to thousands of mom-and-pop shareholders as part of a campaign against metal manufacturer Arconic Inc’s (ARNC.N) management team last year.
The cliffhanger proxy contest at Procter & Gamble Co (PG.N) a few months ago, in which activist hedge fund Trian Partners LP claimed victory against the consumer goods company with a margin of 0.0016 percent of the shares outstanding, or just 42,780 votes, following the most expensive shareholder activist campaign in history, has reinforced the importance of individual investors. The outcome of that shareholder vote was disputed, but Procter & Gamble ended up agreeing to add Trian Chief Executive Nelson Peltz to its board of directors.
Between 70 percent and 80 percent of NXP shareholders must agree to tender their shares for the deal with Qualcomm to go through. The tender offer deadline has been pushed back while the deal awaits regulatory approvals globally. Only China has yet to give the green light to the deal, something that Qualcomm expects to happen this month, sources have said.
“If you accept Qualcomm’s current offer price, you risk losing money,” Elliott said in the eight-page mailing reviewed by Reuters on Thursday. Elliott, run by billionaire investor Paul Singer, owns a 7.2 percent stake in NXP worth roughly $3 billion.
Elliott’s presentation said $135 per share before a takeover premium would be a reasonable price for NXP, based on a financial analysis done by the hedge fund and its financial adviser UBS Group AG (UBSG.S).
Qualcomm CEO Steven Mollenkopf reiterated on the company’s earnings call on Wednesday that buying NXP at $110 per share is an “attractive deal.”
Qualcomm is also trying to defend itself against a $103 billion cash-and-stock bid from Broadcom Ltd (AVGO.O) and Mollenkopf has been seeking to make the case to his shareholders that Broadcom’s bid is inadequate.
Reporting by Liana B. Baker in San Francisco; Editing by Jacqueline Wong