Broadcom offers $103B in tech union
Deal with Qualcomm could have effect on smartphone industry
Broadcom is pitching a deal to acquire Qualcomm for more than $103 billion in a combination of two semiconductor giants that are crucial to the speed, functionality and cost of smartphones.
The deal, which includes debt Broadcom would assume, would be the largest technology acquisition, according to Dealogic. The combined company would create a global tech juggernaut with about $51 billion in annual revenue and major customers such as Apple.
Broadcom publicized its proposed acquisition in a letter to Qualcomm sent to investors and the media Monday morning.
It was not immediately clear whether Qualcomm planned to engage Broadcom in discussions or fight the proposal.
Broadcom offered to pay $70 per share for Qualcomm — $60 in cash and
$10 in stock. Qualcomm (QCOM) shares closed up 1.8% Monday at $62.90. Shares rose more than 12% Friday after news reports detailed Broadcom’s potential bid.
Broadcom (AVGO) shares ended up
0.5% at $274.87. Broadcom said it would maintain its offer, regardless of the outcome of Qualcomm’s effort to acquire NXP Semiconductors. The San Diegoheadquartered Qualcomm made its $38 billion bid in October 2016 for Dutchbased NXP, a major provider of global automotive semiconductor sales.
“This complementary transaction will position the combined company as a global communications leader with an impressive portfolio of technologies and products,” Broadcom CEO Hock Tan said in a statement.
Qualcomm’s board of directors will assess the bid, the company said in a news release Monday, “to pursue the course of action that is in the best interests of Qualcomm shareholders.”
A merger of Broadcom, which specializes in wired communication technology, with Qualcomm, a wireless telecommunication giant, “would make strategic sense and would be highly accretive, bringing two communications powerhouses together ahead of the 5G technology cycle,” Christopher Rolland, an analyst with Susquehanna Financial Group, said in a note to investors.
5G is the next generation of mobile technology, promising blistering download speeds for consumers. Their appetite for more bandwidth has spurred a race in the telecommunication industry to build the networks and infrastructure — including chips — to support it.
In an event at the White House, Broadcom CEO Tan said Thursday that the company would move its headquarters to Delaware. Broadcom has twin corporate headquarters in San Jose and Singapore. Last year, Singapore-based chipmaker Avago Technologies’ took over Broadcom.
Broadcom’s move would make it more likely to close a $5.5 billion bid it made last year for data center-connectivity company Brocade, as well as the Qualcomm deal.
Qualcomm develops CDMA communication technologies used by smartphones on networks by Verizon, Sprint and other carriers. Had Broadcom proposed this bid and remained co-headquartered overseas “we don’t think the U.S. government would allow important technologies to leave to a Singapore- based entity,” Rolland said.
This merger has significant regulatory hurdles because “the combined entity would dominate the high-end Wi-Fi market,” he said.
Broadcom and Qualcomm supplied parts for Apple’s most recent iPhones, including the iPhone X. Qualcomm and Apple are engaged in a dispute over how much Apple pays in licensing fees to Qualcomm. Apple sued Qualcomm in January, and Qualcomm sought in July to ban the import of iPhones to the USA, citing infringement of its patents.
Qualcomm may reject this offer, CFRA Research analyst Angelo Zino said in a note to investors Monday.
“We would not be surprised if it rejects the offer,” he said, “as we think shares have largely underperformed due to legal issues and (the) NXP Semiconductor deal concerns when fundamentals are improving.”
It’s unclear whether Qualcomm will consider the acquisition proposal or fight it. JUSTIN SULLIVAN/GETTY IMAGES
Broadcom says the transaction could make the company a global communications leader. ANGEL NAVARRETE/BLOOMBERG