Broadcom Raises Offer for Qualcomm to Over $121 Billion--Update

02/05/18 10:06 AM EST
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)

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