Broadcom floats $105B bid for chipmaker

Broadcom has offered about $105 billion for Qualcomm, kicking off an ambitious attempt at the largest technology takeover ever in a deal that would rock the electronics industry.

Broadcom made an offer of $70 a share in cash and stock for Qualcomm, a 28 percent premium for the world’s largest maker of mobile phone chips as of the stock’s closing price Thursday. The proposed transaction is valued at approximately $130 billion on a pro forma basis, including $25 billion of net debt.

Buying Qualcomm would make Broadcom the third-largest chipmaker, behind Intel and Samsung. 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.

The deal would dwarf Dell’s $67 billion acquisition of EMC in 2015 — then the biggest in the technology industry.

“This complementary transaction will position the combined company as a global communications leader with an impressive portfolio of technologies and products,” Hock Tan, president and chief executive officer of Broadcom, said in a statement Monday. “We would not make this offer if we were not confident that our common global customers would embrace the proposed combination.”

Qualcomm is preparing to fend off the unsolicited offer, arguing that it undervalues the company, according to people familiar with the plans.

Qualcomm will argue that the proposal is an opportunistic move to buy the chipmaker on the cheap, they said, and it will likely recommend that shareholders reject it.

The bid values Qualcomm at about 21.2 times earnings before interest, tax, depreciation and amortization, compared with a median multiple of 22.5 for similar deals in the industry, according to data compiled by Bloomberg.

Tan is making a play for Qualcomm as the once-unstoppable chipmaker limps through a

rare moment of weakness. Qualcomm’s most profitable unit, which licenses mobile phone technology, is under assault from regulatory actions around the world and a legal challenge from Apple.

The lawsuit may prompt Apple to stop buying Qualcomm chips for use in the iPhone and other products, which would deal a major blow to a unit that drives the bulk of Qualcomm’s revenue. Meanwhile, Broadcom counts Apple among its largest customers.

Broadcom’s Tan has played a pivotal role in a wave of consolidation engulfing the $300 billion semiconductor industry over the past three years. In an announcement with President Donald Trump, Tan said he would move Broadcom’s headquarters from Singapore to the U.S.

The move was largely symbolic: Broadcom already lists San Jose, Calif., as a corporate co-headquarters. But analysts said the domicile change would make it easier for Broadcom to launch deals from the U.S.