Broadcom unwilling to accept no for an answer from Qualcomm

Company says it remains fully committed to deal after $105B (U.S.) offer rejected

SAN FRANCISCO— Qualcomm Inc. rejected Broadcom Ltd.’s $105-billion (U.S.) acquisition offer, kicking off what would be the largest technology takeover battle in history.

The San Diego-based company recommended shareholders spurn the deal, saying it’s an opportunistic move by Broadcom to buy the wireless-chip maker on the cheap. Qualcomm also said the transaction may face regulatory scrutiny that would cast doubt on its completion.

The rebuff ratchets up pressure on Broadcom to sweeten its offer, or embark on a proxy battle, which carries its own risk of rejection by shareholders.

For now, Broadcom said it remains “fully committed” to going ahead with the purchase.

“It is the board’s unanimous belief that Broadcom’s proposal significantly undervalues Qualcomm relative to the company’s leadership position in mobile technology and our future growth prospects,” said Paul Jacobs, executive chairperson of Qualcomm, in a statement. Broadcom CEO Hock Tan on Nov. 6 offered $70 a share in cash and stock for Qualcomm, seeking to build a powerhouse that leads the market for wireless chips in devices such as Apple iPhones. Even before Qualcomm’s response, Tan and his advisers were preparing to wage a proxy battle in which they appeal directly to Qualcomm investors.

Tan said he’s pleased with the reaction he’s already received from Qualcomm shareholders and customers regarding his proposal and would prefer to keep the negotiations friendly.

“We have received positive feedback from key customers about this combination,” he said in a statement following Qualcomm’s rejection.

“We continue to believe our pro- posal represents the most attractive, value-enhancing alternative available to Qualcomm stockholders and we are encouraged by their reaction.”

Buying Qualcomm would reshape the chipmaking industry, transforming Broadcom into the third-largest semiconductor maker, behind Intel Corp. and Samsung Electronics Co. The combined business would instantly become the default provider of a set of components needed to build each of the more than a billion smartphones sold every year.

“Qualcomm shareholders are likely to hold out for more, but we believe something in the $80-ish range is likely enough to bring most of them around,” wrote Stacy Rasgon, an analyst at Sanford C. Bernstein.

Qualcomm shares rose $1.92, nearly 3 per cent, to $66.49 in Monday trading.