Qual­comm says no to huge of­fer.

Chip­maker re­jects un­so­licited $103 bil­lion of­fer, say­ing that it was un­der­val­ued

The Mercury News - - Front Page - By Rex Crum rcrum@ba­yare­anews­group.com

SAN JOSE » Broad­com’s ef­forts to ac­quire Qual­comm hit a road­block Mon­day as the San Diego-based com­mu­ni­ca­tions chip­maker re­jected Broad­com’s $103 bil­lion takeover of­fer.

Qual­comm’s board of di­rec­tors re­leased a state­ment be­fore the stock mar­ket opened Mon­day, with Qual­comm Ex­ec­u­tive Chair­man Paul Ja­cobs say­ing Broad­com’s un­so­licited bid is sim­ply not enough for Qual­comm to ac­cept.

“Broad­com’s pro­posal sig­nif­i­cantly un­der­val­ues Qual­comm rel­a­tive to the com­pany’s lead­er­ship po­si­tion in mo­bile tech­nol­ogy and our fu­ture growth prospects,” Ja­cobs said.

By turn­ing down Broad­com’s of­fer, Qual­comm has set the stage for a num­ber of pos­si­bil­i­ties that could af­fect its fu­ture. Broad­com could seek out al­liances with Qual­comm’s large, in­sti­tu­tional share­hold­ers. The com­pany could keep its price of­fer in place and go as far as to launch a proxy fight at Qual­comm’s next an­nual share­hold­ers’ meet­ing. Broad­com could even raise its bid and put more pres­sure upon Qual­comm’s se­nior ex­ec­u­tives and board mem­bers to ac­cept a deal.

“I’m not sur­prised at all at Qual­comm’s re­jec­tion,” said Patrick Moor­head, prin­ci­pal an­a­lyst with Moor In­sights & Strat­egy. “The bid was a low-ball of­fer, (and) well be­low the com­pany’s short-term value. Strate­gi­cally, it doesn’t even make sense given Broad­com’s short-term ap­proach.”

Broad­com made its of­fer for Qual­comm on Nov. 6. The deal of­fered Qual­comm share­hold­ers $60 a share, plus $10 in Broad­com stock for each share of Qual­comm. With the as­sump­tion of Qual­comm’s debt, the deal would have been worth as much as $130 bil­lion.

But Qual­comm Chief Ex­ec­u­tive Of­fi­cer Steve Mol­lenkopf said that Qual­comm

is in a com­pet­i­tive po­si­tion where it doesn’t need to jump at an of­fer, even one as large as Broad­com’s.

“No com­pany is bet­ter po­si­tioned in mo­bile, IoT (in­ter­net of things), au­to­mo­tive, edge com­put­ing and net­work­ing within the semi­con­duc­tor in­dus­try,” Mol­lenkopf said, in Qual­comm’s state­ment. “We are con­fi­dent in our abil­ity to cre­ate sig­nif­i­cant ad­di­tional value for our stock­hold­ers as we con­tinue our growth in these at­trac­tive seg­ments

and lead the tran­si­tion to 5G (mo­bile tech­nol­ogy).”

Qual­comm said it would have no fur­ther com­ment on the mat­ter.

In a state­ment sent to this pub­li­ca­tion, Broad­com said it re­mains “fully com­mit­ted” to pur­su­ing an ac­qui­si­tion of Qual­comm.

“We have re­ceived pos­i­tive feed­back from key cus­tomers about this com­bi­na­tion,” said Broad­com CEO Hock Tan. “We con­tinue to be­lieve our pro­posal rep­re­sents the most at­trac­tive, value-en­hanc­ing al­ter­na­tive avail­able to Qual­comm stock­hold­ers, and we are en­cour­aged by their re­ac­tion.”

Broad­com lists San Jose as its co-head­quar­ters, and is in the process of mov­ing its le­gal head­quar­ters from Sin­ga­pore to the United States.

Qual­comm shares rose al­most 3 per­cent, to close at $66.49, while Broad­com closed 0.02 per­cent higher, at $265.01 a share in late trad­ing Mon­day.


Qual­comm said the deal by Broad­com would face sub­stan­tial reg­u­la­tory re­sis­tance to a merger of the mas­sive chip­mak­ers.

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