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llustration: Rebecca Zisser/Axios

Qualcomm yesterday disclosed that it will pay $2 billion to Dutch chipmaker NXP, after pulling the plug on a $44 billion takeover attempt.

The big picture: Qualcomm, which declined comment, seems to have made a $2 billion bet in April that trade tensions between the U.S. and China would settle down by mid-July. Perhaps it thought it really understood President Trump, since he had just saved it from a hostile takeover by Broadcom. It was wrong.

Here's what happened:

  • Qualcomm originally agreed to buy NXP in October 2016.
  • That agreement included a $2 billion reverse termination fee, but there were some exceptions to when it would be applicable. The big one was if Qualcomm couldn't get enough NXP stockholders to tender their shares (the deal had to be done via a tender, not just a vote, because of Dutch securities laws).
  • Qualcomm never hit the tender threshold.
  • This past April the two companies amended the agreement, as U.S.-China trade tensions were getting in the way of gaining Chinese regulatory approval. The headline change was around three-month extension to get the approval, but the fine print included a removal of language that tied the $2 billion fee to enough shares being tendered.
  • That April agreement could have just included a change to the expiration date, but instead it did much more. It is unclear if NXP, which declined comment, requested the additional changes, or if Qualcomm ever objected.
  • Had the language not been changed, NXP still could have argued it was owed the money because of China's refusal to approve. But Qualcomm would have had a strong defense that the failure to get enough tendered shares was a more fundamental reason for the breakup.

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