Qualcomm turns down Broadcom’s revised offer, leaves door inched open
Broadcom has been pursuing an acquisition of competing chipmaker Qualcomm since November for the price of $70 per share or an overall valuation of $105 billion. Since Qualcomm’s publication of an appeal letter that poked against Broadcom’s case for a buyout — including national security and regulatory concerns — the company decided to up its offer by 15 percent to $121 billion, about $82 per share.
Qualcomm continues to argue against the deal. In a press release today, the company announced that its board of directors had unanimously objected the new offer. Addressing Broadcom’s CEO, Hock Tan, the board wrote in a letter that it is willing to meet with him to test his limits for an even better deal — Tan has a track record of acquiring companies, including Broadcom, at his initial offering price or not more than 6 percent above it.
Here’s a key excerpt of the letter:
What is the true highest price at which you would be prepared to acquire Qualcomm? Is it $82 per share or is it higher? Your current proposal is inadequate as it materially undervalues Qualcomm. Your proposal ascribes no value to our accretive NXP acquisition, no value for the expected resolution of our current licensing disputes and no value for the significant opportunity in 5G. Your proposal is inferior relative to our prospects as an independent company and is significantly below both trading and transaction multiples in our sector.
Qualcomm has been receiving regulatory approval for its $37 billion takeover of NXP Semiconductors, something which Broadcom said it would not recognize in its bid, and has notched commitments from carriers around the world to support its mobile 5G modem. Not much has been addressed about ongoing litigation with other regulatory bodies and Apple over its alleged anticompetitive behavior in securing parts contracts — among them, CDMA modems and power management chips.
The San Diego-based chipmaker is also asking for assurances on what actions Singaporean counterpart Broadcom will take to ensure that the transaction will pass regulatory muster — perhaps by giving up some of its businesses — and disclosing accommodation risks to shareholders.
Qualcomm’s annual shareholder meeting will take place on March 6, centering around a vote on if the current board of directors will get to stay or if Broadcom’s nomination will take hold, giving it sway over its corporate interests.