Broadcom increases offer to buy Qualcomm to $121 billion
Largest tech takeover ever would create firm with chips used in most smartphones
Broadcom raised its takeover bid for rival chipmaker Qualcomm to about $121 billion (U.S.) Monday, piling on pressure for Qualcomm to agree to what would be the biggest-ever takeover in the technology industry.
In offering $82 a share, Broadcom is raising the stakes a month before Qualcomm’s annual shareholder meeting, at which it hopes to unseat the entire board.
The bid, according to Broadcom, is its “best and final” offer. The move by Broadcom comes amid consolidation in the chipmaking industry and it would create a tech giant whose products would be used in nearly all of the world’s smartphones.
Whether a deal actually goes ahead, however, remains an open question — Qualcomm’s leadership is fiercely opposed, while analysts have said that even if shareholders approved the deal, it could be rejected on antitrust grounds or because the Singapore-based Broadcom would be taking over a U.S. company in a delicate sector. Qualcomm’s management team and board have consistently argued that the takeover approach was opportunistic — coming during its bruising legal fight with Apple — and priced too low.
But the revised offer may entice shareholders of the target company into demanding that its executives begin negotiations for a deal. Qualcomm reported a 96-per-cent drop in operating income last week, as Apple has refused to pay some licensing fees. It is also struggling to complete its own takeover bid for the chipmaker NXP Semiconductor amid pushback from investors of that company.
Broadcom also pledged to pay a “significant” breakup fee in case a deal with Qualcomm is vetoed by government regulators, as well as pay additional cash if the two companies have not closed a transaction a year after announcement.
Such assurances may prove important, given questions among analysts and investors over whether a combination of the two could win regulatory approval.
There are concerns that the chip industry is increasingly concentrated in just a few hands, and a government committee in the U.S. that examines takeovers for threats to national security could also pose a roadblock.