Broadcom offers $103 billion for Qualcomm, sets up takeover battle
NEW YORK: Chip maker Broadcom Ltd on Monday announced an unsolicited bid to buy peer Qualcomm Inc for $103 billion as it looks to boost its presence in the wireless market, setting the stage for what could be one of the biggest takeover battles.
Qualcomm said it would review the proposal and act in the best interests of its shareholders. The company is inclined to reject the bid as too low and fraught with risk that regulators would reject it or take too long to approve it, people familiar with the matter said.
A tie-up would combine two of the largest makers of wireless communications chips for mobile phones and raise the stakes for Intel Corp, which has been diversifying into smartphone technology from its stronghold in computers.
Broadcom approached Qualcomm last year to discuss a potential combination, but it did not contact Qualcomm prior to unveiling its $70 per share offer on Monday, according to the sources. Qualcomm is more vulnerable to a takeover now because its shares have been held down by a legal dispute with Apple Inc, as well as concerns it may have to raise its own $38 billion bid for NXP Semiconductors NV that it made last year.
Broadcom said Qualcomm shareholders would get $60 in cash and $10 per share in Broadcom shares in a deal. Including debt, Broadcom's bid values the transaction at $130 billion.
Canaccord Genuity analysts said they believed Qualcomm's board would likely reject the initial bid as too low and said the company would prefer to remain independent.
The bid for Qualcomm is an ambitious move by Broadcom Chief Executive Hock Tan, who turned a small, scrappy chipmaker into a $100-billion company that is based in Singapore and the United States. It has pulled off a string of purchases over a decade.
Qualcomm, an early pioneer in mobile phone chips, supplies so-called modem chips to phone makers such as Apple , Samsung and LG that help phones connect to wireless data networks. Broadcom is also a major supplier to many of the same companies for Wi-fi chips. Any deal struck between the two companies would face intense regulatory scrutiny.
“The Street is factoring in regulatory, shareholder, and financial hurdles with this deal, as it's not a friendly deal,” GBH Insights analyst Daniel Ives told Reuters
“While this deal certainly presents regulatory hurdles to overcome this is a smart move for Broadcom as the company finds itself in a position of strength to acquire Qualcomm and create a juggernaut that could dominate key parts of the tech food chain,” Ives said.
To complicate matters, Qualcomm is trying to close its $38-billion acquisition of NXP Semiconductors, one of the largest makers of chips for vehicles and expanding into self-driving technology.