Qualcomm shuns Broadcom’s $105B offer
Proxy battle, better offer seen as next step
SAN FRANCISCO• Qualcomm rejected Broad com’ s US$ 105- billion acquisition offer, kicking off what would be the largest technology takeover battle in history.
The San Diego-based company recommended shareholders spurn the deal, saying it’s an opportunistic move by Broadcom to buy the wireless chipmaker on the cheap. Qualcomm also said the transaction may face regulatory scrutiny that would cast doubt on its completion.
The rebuff ratchets up pressure on Broadcom to sweeten its offer, or embark on a proxy battle, which carries its own risk of rejection by shareholders. For now, “fully committed” to going ahead with the purchase.
“It is the Board’s unanimous belief that Broadcom’s proposal significantly undervalues Qualcomm relative to the company’s leadership position in mobile technology and our future growth prospects,” said Paul Jacobs, executive chairman and chairman of the board of Qualcomm, in a statement.
Broadcom chief executive officer Hock Tan on Nov. 6 offered US$ 70 a share in cash and stock for Qualcomm, seeking to build a powerhouse that leads the market for wireless chips in devices like Apple Inc.’s iPhones. Even before Qualcomm’s response, Tan and his advisers were preparing to wage a proxy battle in which they appeal directly to Qualcomm investors.
Qualcomm rose three per cent to close at US$ 66.49 in New York Monday. Since the offer from Broadcom, it has traded below the bid price on skepticism that a transaction can be completed.
Tan said he’s pleased with the reaction he’s already received from Qualcomm shareholders and customers regarding his proposal and would prefer to keep the negotiations friendly.
Buying Qualcomm would reshape the chipmaking industry, transforming Broadcom into the third- largest semiconductor maker, behind Intel Corp. and Samsung Electronics. 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 US$ 67- billion buy of EMC in 2015.
“Qualcomm shareholders are likely to hold out for more, but we believe something in the US$80-ish range is likely enough to bring most of them around,” Stacy Rasgon an analyst at Sanford C. Bernstein wrote in a note published on the weekend. Broadcom is unlikely to walk away since there is significant headroom to find a deal acceptable to Qualcomm shareholders, he added.
Ta n , who has built Broadcom through a series of transactions that have helped reshape the US$300-billion semiconductor industry, has previously been able to pull off deals with friendly approaches. Acquiring Qualcomm is further complicated by his target’s own push to close a more than US$40 billion purchase of NXP Semiconductors. That purchase is being held up by regulatory approval. Tan said his offer for Qualcomm stands with or without Qualcomm’s acquisition of NXP.
For now, Qualcomm’s board is sticking with its management team, led by CEO Steve Mollenkopf.
“After a comprehensive review, conducted in consultation with our financial and legal advisers, the board has concluded that Broadcom’s proposal dramatically undervalues Qualcomm and comes with significant regulatory uncertainty,” said Tom Horton, the company’s presiding director, in the statement. “We are highly confident that the strategy Steve and his team are executing on provides far superior value to Qualcomm shareholders than the proposed offer.”