Qualcomm came out on top Monday in its contested bid to buy Swedish automotive sensor/software outfit Veoneer — highlighting the San Diego company’s efforts to diversify beyond smartphones in part by boosting its technology footprint with top automakers.
Qualcomm and SSW Partners of New York, a newly formed private equity firm, announced that they reached an agreement to acquire Veoneer for $37 per share — or $4.5 billion.
That price exceeds the $31.25 per share, or $3.8 billion, offered earlier by Magna International, a Canadian auto components supplier.
This summer, Veoneer’s board of directors accepted Magna’s offer pending a shareholder vote. But that was before Qualcomm stepped in with a higher bid in August.
Magna walked away from the deal on Monday, waiving its four-day window to increase its offer price. It expects to receive a break-up fee of $110 million from Veoneer.
The complex transaction must be approved by regulators. But it builds on Qualcomm’s strategy to elbow its way deeper into the automotive technology market.
Qualcomm already supplies chips to carmakers for connectivity, infotainment and the digital cockpit. It had $253 million in automotive sales last quarter and a $10 billion future order backlog.
But the company has set its sights on becoming a top supplier of Advanced Driver-Assistance Systems (ADAS) and autonomous driving technologies through its Snapdragon Ride platform.
The ADAS technology market is forecast to grow from $13 billion last year to $46 billion by 2030 as more automakers layer in autonomous features in their vehicles.
Veoneer has developed a software suite, called Arriver, for ADAS and autonomous driving. In January, Qualcomm began working with Veoneer to integrate Arriver’s computer vision and driving policy technologies into Snapdragon Ride.
Arriver’s software is all that Qualcomm really wants in the acquisition, said Stacy Rasgon, an analyst with Bernstein Research, in a note to clients.
“Automotive forms a core piece of Qualcomm’s adjacency strategy but consists primarily of telematics/connectivity and digital cockpit/infotainment today,” said Rasgon. “However, an acquisition of the Arriver software will allow them to deliver a full-stack, fully integrated silicon/software solution similar to what Mobileye delivers, giving the company what they need to make a bigger play in the ADAS/autonomous vehicle space.”
The transaction is structured so that SSW Partners will acquire Veoneer and then sell Arriver to Qualcomm.
“Qualcomm is the natural owner of Arriver,” said Chief Executive Cristiano Amon in a statement. “By integrating these assets, Qualcomm accelerates its ability to deliver a leading and horizontal ADAS solution as part of its digital chassis platform.”
After the sale, SSW and Veoneer’s management will work to find buyers for the company’s remaining businesses, which make up the bulk of its revenue. They include a host of safety sensor technologies such as forward collision warnings, autonomous emergency braking, adaptive cruise control, lane departure warnings and seat belt tension/air bag deployment systems, among other things.
“This transaction creates superior value for our shareholders,” said Jan Carlson, chief executive of Veoneer, in a statement. “It also provides attractive opportunities to our Arriver team at Qualcomm and allows our other businesses to find long-term industrial partners where they can continue to develop.”
The deal was announced Monday before markets opened. Qualcomm’s shares ended trading down 2 percent at $126.68. Veoneer’s shares gained nearly 5 percent to close at $36.19.