Broadcom Raises Offer for Qualcomm to Over $121 Billion--Update
06 February 2018 - 2:21AM
Dow Jones News
By Ted Greenwald and Imani Moise
Broadcom Ltd. sweetened its takeover offer for Qualcomm Inc. in
a deal that would be worth more than $121 billion, turning up the
pressure on the target in what would be the largest-ever technology
deal.
Broadcom said Monday it would pay $82 a share in cash and stock,
up from its initial offer in November of $70 a share in cash and
stock, or $105 billion. Broadcom said the revised bid -- its "best
and final offer" -- represents a 50% premium to Qualcomm's share
price on Nov. 2, before news of an expected bid emerged. The cash
portion of Broadcom's offer remained at $60 a share.
Combined, Broadcom and Qualcomm would form the No. 3 chip maker
by revenue, behind Intel Corp. and Samsung Electronics Co.
Qualcomm rejected the earlier bid, saying it dramatically
undervalued the company and that the potential deal would face
finance challenges. Broadcom said Monday that it has already
negotiated enough financing to cover any transaction.
Broadcom shares rose 0.9% to $237.50 during premarket trading,
while Qualcomm stock fell 2% to $64.80.
"Even when the deal was first announced, many Broadcom
shareholders -- and I'd guess a lot of Qualcomm shareholders -- had
in mind a number with an '8' in front of it," Stacy Rasgon, an
analyst with Bernstein Research, said of the per-share bid.
In a news release Monday, Qualcomm said it wouldn't comment on
the revised offer until its board completed a review of the
bid.
Broadcom said the deal could close about 12 months after an
agreement is signed. The company said it is prepared to invite
Qualcomm Executive Chairman Paul Jacobs and another Qualcomm
director to join its board once the deal is closed.
The new bid ratchets up the stakes in a hostile standoff that
could affect wide swaths of the market for chips used in data
centers and smartphones. Broadcom is a market leader in a variety
of chips for wired and wireless devices, including Wi-Fi and
Bluetooth chips for smartphones. Qualcomm is a leader in chips that
manage cellular communications in smartphones.
Qualcomm, in an effort to persuade shareholders to resist
Broadcom's initial bid, released a presentation mid-January
outlining a path to grow adjusted per-share earnings from $4.28 in
fiscal 2017 to between $6.75 and $7.50 in fiscal 2019.
It promised that in the event it doesn't complete its proposed
acquisition of NXP Semiconductors NV, which has been held up in
regulatory reviews, it would create an equivalent boost to earnings
by buying back shares. Qualcomm also promised to shed $1 billion in
costs.
Qualcomm in a later letter to shareholders emphasized the
difficulty of getting the proposed merger past international
regulators regardless of Broadcom's ultimate offer, saying it was
"highly doubtful" the transaction would be approved.
Broadcom and Qualcomm discussed a potential deal as early as
2016, according to regulatory filings. Since launching its offer,
Broadcom management has said Qualcomm's directors refuse to engage.
Broadcom responded by nominating its own slate of directors for
Qualcomm shareholders to vote on at the company's annual
shareholder meeting, which is slated for early March.
Qualcomm in recent years has been under attack from customers
and antitrust regulators who allege the company's business
practices aren't fair. Apple Inc. is suing the chip maker in
multiple countries, and Qualcomm has faced regulatory fines in
China, South Korea, Taiwan and the European Union. Qualcomm is
appealing some regulatory decisions and fighting Apple in
court.
Write to Ted Greenwald at Ted.Greenwald@wsj.com and Imani Moise
at imani.moise@wsj.com
(END) Dow Jones Newswires
February 05, 2018 10:06 ET (15:06 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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