May 11, 2021

Why Samsung might consider buying this $55 billion company

To say that Samsung has deep pockets would be an understatement. The company is sitting on more than $114 billion in cash and it hasn’t made any major acquisitions recently. Samsung’s largest deal was in 2016 when it acquired Harman for $8 billion.

Rumors have been circulating recently that Samsung is eyeing a major acquisition. The company reportedly wants to acquire a semiconductor manufacturer to further cement its position in the market. According to reports, there’s a $55 billion company that Samsung’s interested in.

Has Samsung found the perfect acquisition target?

Samsung’s CFO Choi Yoon-ho revealed earlier this year that the company is looking for mergers and acquisitions in the automotive semiconductor industry. It didn’t name the potential targets that it’s vetting, but market watchers have made some predictions.

NXP Semiconductors is a name that’s repeatedly being mentioned. This Dutch company has a $55 billion market cap and seems to have caught Samsung’s attention. Other companies including Texas Instruments and Microchip Technologies have also been named as potential targets. However, some analysts believe that they may not be a good fit for Samsung.

J.P. Morgan analyst JJ Park is of the view that the acquisition of NXP makes sense for Samsung. The only reason Samsung wants to buy a company in this space is to strengthen its position in the automotive semiconductor market. Around 10% of NXP’s revenue from Continental AG, a German auto-parts company.

It’s not like Samsung would simply pay $55 billion out of the $114 billion or so cash that it has in the bank. Such massive deals are rarely structured so simply. Be that as it may, it would certainly be Samsung’s biggest acquisition so far.

It would also trump many of the high-value deals in the semiconductor market. For example, NVIDIA bought ARM for $40 billion last year while AMD bought Xilinx for $35 billion. With significantly deeper pockets and financial muscle, Samsung won’t have any issues paying for a massive transaction.

However, whether a deal can be struck is another matter entirely. Interest alone isn’t an indication of an impending deal. No matter how much the market feels this is a good buy for Samsung, there’s a lot that the Korean juggernaut will consider before spending such a ridiculous amount of money.

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