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NXP shareholders owe a big ‘thank you’ to Broadcom’s CEO

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“Certainty on NXP was important to Qualcomm and its shareholders,” Tom Horton, presiding director of the Qualcomm board of directors, told CNBC today.

ISS determined Qualcomm’s forecast of $5.25 in adjusted earnings per share for fiscal year 2019 is “feasible,” given NXP’s expected adjusted net income of $2.7 billion, or $1.84 per share on a pro forma basis. That’s crucial to Qualcomm’s case that it’s better off as an independent entity than selling to Broadcom for $82 a share.

Qualcomm says Broadcom’s offer significantly undervalues the company, assuming it can favorably resolve its ongoing litigation with Apple. Buying NXP allows Qualcomm to argue $5.25 in adjusted EPS is a reasonable benchmark.

Horton said past semiconductor deals have been completed with an EPS multiple of 22, which would value Qualcomm, using a projected EPS number of $6.75 (with $1.50 per share added for the Apple resolution), at a whopping $148.50 per share — well above what Broadcom has been willing to offer.

Broadcom has argued $4.50 EPS is a more reasonable guidance, even after NXP completion, and resolution with Apple will only generate up to extra $1 in EPS accretion, according to ISS.

Qualcomm secured backing from NXP shareholders controlling about 28 percent of the company with its new offer, including activist hedge fund Elliott Management, which has championed a higher bid for months. Qualcomm also lowered the minimum tender threshold to 70 percent from 80 percent to help it close a deal.

Broadcom has said its offer to buy Qualcomm for $82 a share — or more than $121 billion — is contingent on the NXP deal falling apart or it getting done at the previous price of $110 per share.

Tan told CNBC that NXP “would not solve Qualcomm’s problems” in a Feb. 12 interview. Broadcom is “evaluating its options” after Qualcomm’s increased NXP offer, it said in the statement. Qualcomm is still waiting on Ministry of Commerce in China approval as a final regulatory hurdle with its NXP deal.

Qualcomm had internally debated a smaller raise to acquire NXP before it officially increased its bid to $127.50, said several people. Qualcomm said in a statement the new price reflects NXP’s recent performance, strong market dynamics, and high confidence in annualized cost synergies of at least $500 million “resulting from insights gained” during the companies’ integration discussions and research.

NXP “earnings are up 20 percent from the time we did the deal,” Horton said to CNBC. “And we raised the bid 16 percent. So it’s actually at a lower multiple than the deal when it was originally announced.”

A spokesman for Qualcomm declined to comment further.

Indeed, NXP shareholders who asked Qualcomm for more, including Elliott, have pointed to NXP’s strong performance and the relative stock moves from NXP comparables, including Broadcom, which itself is up 45 percent since the NXP deal announcement on Oct. 27, 2016.

“Qualcomm’s board of directors and management have transferred $4.10 per Qualcomm share from Qualcomm stockholders to NXP stockholders, representing approximately $6.2 billion of value,” Broadcom said in a statement Tuesday. “This revised price for NXP is well beyond what Qualcomm has repeatedly characterized as a ‘full and fair’ price.”

The higher offer also bucks a recommendation from ISS, which said in its report last week that Qualcomm could negotiate provisions with Broadcom to close the NXP deal at a mutually agreed-upon price. ISS recommended Qualcomm shareholders should nominate four of Broadcom’s six recommended new directors to help facilitate discussions between the two companies on a higher takeout price for Qualcomm. Broadcom has already said its current offer is “best and final.”

Glass Lewis, another proxy advisory firm, today recommended Qualcomm shareholders vote for all six director nominees Broadcom is putting forward, effectively endorsing a Broadcom takeover. Glass Lewis also said an NXP increase “would be to the detriment of Qualcomm shareholders.”

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U.S. rejoins Paris climate accord

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President Joe Biden signs executive orders in the Oval Office of the White House in Washington, after his inauguration as the 46th President of the United States, U.S., January 20, 2021.

Tom Brenner | Reuters

President Joe Biden signed an executive order to rejoin the U.S. into the Paris climate agreement on Wednesday, his first major action to tackle global warming as he brings the largest team of climate change experts ever into the White House.

The Biden administration also intends to cancel the permit for the construction of the Keystone XL pipeline from Canada to the U.S. and sign additional orders in the coming days to reverse several of former President Donald Trump’s actions weakening environmental protections.

Biden vows to move quickly on climate change action, and his inclusion of scientists throughout the government marks the beginning of a major policy reversal following four years of the Trump administration’s weakening of climate rules in favor of fossil fuel producers.

Nearly every country in the world is part of the Paris Agreement, the landmark nonbinding accord among nations to reduce their carbon emissions. Trump withdrew the U.S. from the agreement in 2017.

Mitchell Bernard, president of the Natural Resources Defense Council, said Biden’s order to rejoin the accord makes the U.S. part of the global solution for climate change rather than part of the problem.

“This is swift and decisive action,” Bernard said in a statement. “It sets the stage for the comprehensive action we need to confront the climate crisis now, while there’s still time to act.”

With a slim Democratic majority in the Senate, Biden could potentially achieve large parts of his ambitious climate agenda, including a $2 trillion economic plan to push forward a clean-energy transition, cut carbon emissions from the electricity sector by 2035 and achieve net-zero emissions by 2050.

During his first few months in office, Biden is expected to sign a wave of executive orders to address climate change, including conserving 30% of America’s land and waters by 2030, protecting the Arctic National Wildlife Refuge from drilling, and restoring and elevating the role of science in government decisions.

Some legal actions on climate will take longer, including the administration’s plan to reverse a slew of Trump’s environmental rollbacks on rules governing clean air and water and planet-warming emissions. The Trump administration reversed more than 100 environmental rules in four years, according to research from Columbia Law School.

More from CNBC Environment:
UN warns nations of major economic damage without more action on climate change
2020 was one of the hottest years on record, tied with 2016
Control of Senate allows Democrats to act on Biden’s climate change agenda

“From Paris to Keystone to protecting gray wolves, these huge first moves from President Biden show he’s serious about stopping the climate and extinction crises,” Kieran Suckling, executive director of the Center for Biological Diversity, said in a statement. “These strong steps must be the start of a furious race to avert catastrophe.”

The next major U.N. climate summit will take place in Glasgow, Scotland, in November. Countries in the agreement will give updated emissions targets for the next decade.

A goal of the agreement is to keep the global temperature rise well below 2 degrees Celsius, or 3.6 degrees Fahrenheit, compared with preindustrial levels. The Earth is set to warm up by 1.5 C, or 2.7 F, over the next two decades.

Robert Schuwerk, executive director for North America at Carbon Tracker, said rejoining the accord signals to global markets that the U.S. will make tackling climate change a priority, but added that it’s only a part of what the administration must do to lower its emissions.

The U.S. is the world’s second-largest emitter of greenhouse gases behind China. It’s expected to have an updated climate target and a concrete plan to reduce emissions from the power and energy sector.

“Rejoining is just table stakes,” said John Morton, who was President Barack Obama’s energy and climate director at the National Security Council. “The hard work of putting the country on a course to becoming net zero emissions by mid-century begins now.”

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New mandates, a close White House tie and big challenges ahead

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China sanctions Pompeo, O’Brien, Azar and other Trump administration officials

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U.S. Secretary of State Mike Pompeo speaks during a press conference at the Great Hall of the People on June 14, 2018 in Beijing, China.

Lintao Zhang | Getty Images

WASHINGTON – The Chinese government slapped sanctions on former Secretary of State Mike Pompeo, former National Security Adviser Robert O’Brien and former trade adviser Peter Navarro, along with other members of the Trump administration Wednesday.

“Over the past few years, some anti-China politicians in the United States, out of their selfish political interests and prejudice and hatred against China and showing no regard for the interests of the Chinese and American people, have planned, promoted and executed a series of crazy moves which have gravely interfered in China’s internal affairs, undermined China’s interests, offended the Chinese people, and seriously disrupted China-U.S. relations,” wrote the Ministry of Foreign Affairs in a statement.

“China has decided to sanction 28 persons who have seriously violated China’s sovereignty and who have been mainly responsible for such U.S. moves on China-related issues,” the statement also said.

The Chinese government also named former deputy national security adviser Matthew Pottinger, former Health and Human Services Secretary Alex Azar, former U.S. Ambassador to the United Nations Kelly Craft, assistant Secretary of State for East Asian and Pacific Affairs David Stilwell and under Secretary of State for Economic Growth, Energy, and the Environment Keith Krach.

Former national security adviser John Bolton and Stephen Bannon were also sanctioned Wednesday.

“These individuals and their immediate family members are prohibited from entering the mainland, Hong Kong and Macao of China. They and companies and institutions associated with them are also restricted from doing business with China,” wrote the Ministry of Foreign Affairs in a statement.

US President Donald Trump (L) and China’s President Xi Jinping shake hands at a press conference following their meeting outside the Great Hall of the People in Beijing.

Artyom Ivanov | TASS | Getty Images

The crumbling relationship between Washington and Beijing intensified under the Trump administration following an attempt from the world’s two largest economies to mend trade relations.

Chinese Foreign Ministry spokeswoman Hua has previously said the Trump administration “is pressing the accelerator to trash China-U.S. relations.”

“Certain U.S. politicians are so irresponsible that they will say whatever needs to be said to make China a target,” she added last summer.

Her comments followed a blistering speech by then-U.S. Attorney General Bill Barr in which he accused the Chinese government of human rights abuses, espionage and economic blitzkrieg.

“The People’s Republic of China is now engaged in an economic blitzkrieg—an aggressive, orchestrated, whole-of-government campaign to seize the commanding heights of the global economy and to surpass the United States as the world’s preeminent superpower,” Barr said during a July 16 speech.

In June, O’Brien slammed China for a laundry list of offenses before saying that “the days of American passivity and naivety regarding the People’s Republic of China are over.”

Pompeo, who has previously described Huawei and other Chinese state-backed businesses as “Trojan horses for Chinese intelligence.” In July, Pompeo announced that the U.S. was looking at banning TikTok as well as other Chinese social media apps, citing national security concerns.

The Trump administration has also squarely placed blame on China for the deadly health crisis caused by the coronavirus

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