NXP convertibles gain as market mulls Qualcomm merger; health care names slip; volume thin

By Stephanie N. Rotondo

Seattle, May 31 – While overall liquidity in the convertible bond arena was underwhelming, NXP Semiconductors NV’s 1% convertible notes due 2019 were in play on Wednesday.

The bonds improved about a point outright, following an over 1% gain in the equity. The upward moves came as Qualcomm Inc. extended its cash tender offer for NXP’s common stock. The tender is being done as part of a purchase agreement inked back in October.

Also moving around were Acorda Therapeutics Inc.’s 1.75% convertible notes due 2021.

A trader said the convertibles were “a tiny bit weaker,” seeing the notes trade at 77.375 versus a stock price of $13.75.

As for the stock, it finished the day off over 2%.

The trader added that the issue was actively traded, though there was no fresh news out to cause the decline.

But Acorda wasn’t the only health care-linked issue to see weakness in relatively active trading. Anthem Inc.’s 5.25% equity units due 2018 (NYSE: ANTX) waned 29 cents to $51.48, on more than 946,000 units traded.

Anthem’s shares were also lower, falling 97 cents to $182.35.

Meanwhile, mandatory convertible issues continued to be all the rage, as Becton, Dickinson & Co.’s 6.125% series A mandatory convertible preferred stock (NYSE: BDXA) remained busy.

Over 1.94 million of the convertible preferreds were exchanged in midweek trading, rising 51 cents to $53.51.

The company’s equity also continued to climb higher, adding $1.16 to end at $189.23.

Overall, holidays continued to weigh on an already tepid convertible bond market on Wednesday.

A trader noted that the day marked the beginning of the Jewish holiday Shavuot.

“So there’s a lot of people out,” he said.

Compounding that was the fact that it was already a shortened holiday week, given Memorial Day on Monday. The trader said some desks were empty because players opted to just take the whole week off.

NXP firms

NXP Semiconductors’ 1% convertibles were on the busier side of an otherwise lackluster day, a trader reported Wednesday.

Additionally, the convertibles were edging upward as the market looked to see how a planned merger with Qualcomm would play out.

A trader pegged the paper in a 119.25 to 119.5 context. Another market source echoed that level, deeming it up about a point.

The underlying equity firmed $1.76, or 1.63%, to $109.90.

Qualcomm is paying $110.00 per share in the tender. The deadline was extended to 5 p.m. ET on June 28.

However, as of Tuesday, only 14.1% of all outstanding NXP stock had been validly tendered. Perhaps the lackluster response was not all that surprising, as some NXP investors – including Elliott Management Corp. – are trying to persuade NXP to renegotiate its deal with Qualcomm. The investors believe that the current offer undervalues the company.

Mentioned in this article:

Acorda Therapeutics Inc. Nasdaq: ACOR

Anthem Inc. NYSE: ANTM

Becton, Dickinson & Co. NYSE: BDX

NXP Semiconductors NV Nasdaq: NXPI

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