Broadcom raises offer for rival Qualcomm to US$82 a share

Angelica Greene
February 7, 2018

Qualcomm Inc. previously said that a $103 billion unsolicited acquisition offer undervalued the San Diego company.

Broadcom is sweetening its offer to acquire Qualcomm for more than $121 billion.

Broadcom Ltd plans to unveil a new offer of approximately US$120 billion (RM466.6 billion) for Qualcomm Inc today, aiming to ratchet up pressure on its USA semiconductor peer to engage in negotiations, people familiar with the matter said yesterday. That would represent a 50% premium over the price Qualcomm was trading at on November 2, before the news of the first approach broke.

Qualcomm's board of directors has confirmed receipt of the revised offer and says it plans to review the document in accordance with its fiduciary duties. With $25 billion of net debt from Qualcomm in the bargain, the total value of the deal rises to about $146 billion.

The new offer is for $60 in cash and $22 in Broadcom stock for each share of Qualcomm.

Broadcom Qualcomm Acquisition Final Offer Worth $146bn Is Made
Companies Broadcom Qualcomm Acquisition Final Offer Worth $146bn Is Made

Broadcom has fully negotiated commitment papers with its financing sources in an amount sufficient to fully fund the transaction.

To back Qualcomm's existing board in a proxy fight at this point, shareholders would have to believe that management had a credible plan to get the stock price back above that $82 level.

Qualcomm responded that it would consider the offer, but declined to comment further. "Additionally, the deal is contingent upon Qualcomm not delaying or adjourning its annual shareholders meeting past March 6, 2018". It also pledged to pay a "significant" breakup fee in case a deal with Qualcomm is vetoed by regulators, as well as to pay additional cash if the two companies have not closed a transaction a year after announcement. Though that offer would turn a buyout into one of the biggest tech industry mergers ever, Qualcomm wasn't biting. Qualcomm, however, called Broadcom's move "a blatant attempt" to control the company board in order to push the acquisition. Qualcomm now provides SOCs to network carriers and OEM device manufacturers.

In its fight against the hostile takeover, Qualcomm has argued that future growth prospects are strong as it pushes into new markets beyond smartphones, including personal computers, computer servers, automotive semiconductors, radio frequency chips and the Internet of Things gadgets. To appease regulators, Broadcom said it would agree to provisions "at least as favorable as" those provided by Qualcomm in its proposed takeover of NXP.

"We will withdraw this proposal and cease our pursuit of Qualcomm immediately following your upcoming annual meeting unless we have entered into a definitive agreement or the Broadcom-nominated slate is elected", Broadcom CEO Hock Tan said in a letter to Qualcomm's board on Monday.

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