Broadcom offers to pay $143b for Qualcomm, in record tech bid

Buying Qualcomm would make Broadcom the third-largest chipmaker, behind Intel Corp and Samsung Electronics.
Buying Qualcomm would make Broadcom the third-largest chipmaker, behind Intel Corp and Samsung Electronics. PHOTO: REUTERS

SAN FRANCISCO • Broadcom yesterday offered about US$105 billion (S$143 billion) for Qualcomm, kicking off an ambitious attempt at the largest technology takeover ever in a deal that would rock the electronics industry.

Broadcom made an offer of US$70 a share in cash and stock for Qualcomm, a 28 per cent premium for the world's largest maker of mobile phone chips as of the stock's closing price last Thursday, before Bloomberg first reported talks of a deal.

The proposed transaction is valued at approximately US$130 billion on a pro forma basis, including US$25 billion of net debt.

Buying Qualcomm would make Broadcom the third-largest chipmaker, 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 acquisition of EMC in 2015 - then the biggest in the technology industry.

"This complementary transaction will position the combined company as a global communications leader with an impressive portfolio of technologies and products," Mr Tan Hock, chief executive officer of Broadcom, said in a statement. 

"We would not make this offer if we were not confident that our common global customers would embrace the proposed combination,'' he said.

Qualcomm is preparing to fend off the unsolicited bid, arguing it undervalues the company, people familiar with the plans said.

It will argue that the proposal, the largest-ever technology acquisition, is an opportunistic move to buy the chipmaker on the cheap, the people said.

While Qualcomm's board and management will give the offer due consideration, the San Diego-based company will likely recommend that shareholders reject it, the people said.

This would force Broadcom to pursue a proxy fight if it wishes to proceed.

Qualcomm will make the case to shareholders that, in addition to a possible battle with the board, Broadcom may also face challenges from regulators, the people said. Broadcom has been trying since last year to secure approval for its purchase of Brocade Communications Systems, a substantially smaller deal.

Qualcomm is likely to argue that a regulatory limbo could put it on a prolonged and uncertain path that would cast doubt on the value of the deal, the people said.

Meanwhile, Qualcomm is in the process of acquiring NXP Semiconductors, another major chip supplier.

If those two join Broadcom, it would be the world's third-largest chipmaker, with huge sway over the supply chain for phones and a growing presence in connected cars and data centres.

The US$47 billion purchase of Netherlands-based NXP would be Qualcomm's biggest.

But it may be delayed until next year due to government scrutiny, particularly from the European Union and China, the firms have said.

They had aimed to close the acquisition by the end of this year.

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A version of this article appeared in the print edition of The Straits Times on November 07, 2017, with the headline 'Broadcom offers to pay $143 billion for Qualcomm'. Print Edition | Subscribe