5 Biggest Acquisitions of 2016

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Biggest Acquisitions
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Each year there are a handful of acquisitions that bring some eye-popping headlines. 2016 was no different as more than $242 billion were spent on just five major acquisitions.

None of the deals topped the $100 billion-plus ones we saw last year, but there were still some major acquisitions in the tech and telecommunications sectors, as well as the biopharmaceuticals and tobacco industries.

Let’s take a quick look at the five of the biggest acquisitions of the year and how they’re coming along:

SoftBank and ARM Holdings ($31.4 billion)

Back in July, SoftBank (NASDAQOTH: SFTBF) successfully made a bid for the British-based chipmaker ARM Holdings. The all-cash deal closed in September for $31.4 billion, representing a 43% premium on ARM’s stock price at the time of the deal’s announcement.

ARM’s chip technology can be found in smartphones across the globe, including Apple‘s iPhones and Samsung‘s Galaxy devices. But according to SoftBank CEO Masayoshi Son, ARM was purchased to help SoftBank enter the expanding Internet of Things (IoT) market

Son said that “ARM will be the center of the Internet of Things, in which everything will be connected,” and that the IoT is “going to be the biggest paradigm shift in human history.”

SoftBank says it plans to keep ARM’s business completely intact, and actually expand it. SoftBank pledged to double the number of ARM employees in Britain over the next five years, and increase the number of workers internationally as well. 

Shire and Baxalta ($32 billion)

Shire‘s (NASDAQ: SHPG) purchase of Baxalta Incorporated was proposed at the very beginning of the year and closed in early June. The company paid $18 per share in cash, and 0.1482 of its American depositary shares (ADS) for each Baxalta share. 

As a result, Baxalta became an indirectly and wholly owned subsidiary of Shire, and makes Shire the leading biopharmaceuticals company focused on rare diseases. 

Shire expects the Baxalta acquisition to bring $700 million in cost savings over a three-year period, and should help the company bring in earnings per ADS between $12.70 and $13.10 this year.

Qualcomm and NXP Semiconductors ($47 billion)

Qualcomm‘s (NASDAQ: QCOM) late-2016 bid for NXP Semiconductors N.V. (NASDAQ: NXPI) is the largest chip acquisition in history, and will combine one of the leading mobile chip designers with the world’s largest automotive semiconductor maker

The deal values NXP’s shares at $110, representing a 34% premium on the stock price before the talks began. The deal’s cash value is $39 billion, but the price jumps to $47 billion when the purchase of debt is included. 

The deal, which is expected to close toward the beginning of 2017, will boost Qualcomm’s position in the growing automotive technology market. NXP has about 14.5% of the automotive semiconductor market share right now, and Qualcomm will be able to add NXP’s products to its own cellular chip designs for connected vehicles. The automotive semiconductor market was worth $29 billion last year, and IHS expects it to hit $36 billion by 2018. 

British American Tobacco and Reynolds American ($47 billion)

British American Tobacco (NYSEMKT: BTI) made a bid in October to buy up the remaining shares of Reynolds American (NYSE: RAI) that is doesn’t already own (BAT currently owns just over 42% of the company). British American offered $56.50 per share, a 20% premium on Reynolds’ stock price at the time, making the total cash-and-stock deal worth $47 billion.

The deal hasn’t closed yet, but if it does, the combined businesses would create the largest publicly traded tobacco company by market value.

BAT is likely interested in snatching up the rest of Reynolds in order to gain more market share in the U.S. Reynolds made a huge purchase of its own last year when it bought Lorillard Inc. for $25 billion. That purchase helped Reynolds become one of the biggest tobacco companies in the U.S. by revenue. 

AT&T and Time Warner ($85.4 billion) 

In October, AT&T (NYSE: T) announced that it was buying Time Warner (NYSE: TWX) for $85.4 billion in a stock-and-cash deal. That put the value of Time Warner’s stock at $107.50 per share, a 35% premium at the time. 

The deal, which is expected to close in late 2017, will pair AT&T’s 100 million pay-TV and mobile customers with Time Warner’s vast content library, including CNN, TNT, Warner Brothers films and studio, and HBO.

AT&T has said that the deal will be accretive in the first year after it closes, for adjusted earnings per share and free cash flow. The company said the acquisition will also improve its revenue and dividend coverage, and help it diversify its revenue.

That last bit is very important, as AT&T currently makes most of its money from its wireless business. As The Wall Street Journal pointed out, the combined company would make 40% of its revenue from its entertainment content.

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Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple and Qualcomm. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool recommends NXP Semiconductors and Time Warner. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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