Tue, Nov 07, 2017 - Page 10 News List

Qualcomm set to fend off bid from Broadcom

UNSOLICITED TAKEOVER:Chipmaker Qualcomm is set to argue to shareholders that the bid by Broadcom, at US$70 per share, is a move to buy it on the cheap

Bloomberg

Qualcomm Inc is preparing to fend off an unsolicited US$100 billion takeover bid from Broadcom Ltd, arguing that it undervalues the company, sources familiar with the plans said.

Broadcom is preparing a US$70-a-share offer for Qualcomm, which was to come as soon as yesterday, said the sources, who asked not to be identified because the plans are private.

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

While Qualcomm’s board and management are to give the offer due consideration, the San Diego-based company is likely to recommend that shareholders reject it, the sources said.

This would force Broadcom to pursue a proxy fight if it wishes to proceed. A Qualcomm spokesman declined to comment, and Broadcom did not immediately respond to a request for comment.

Qualcomm is to make the case to shareholders that, in addition to a possible battle with the board, Broadcom might also face challenges from regulators, the sources said.

Broadcom has been trying since last year to secure approval for its purchase of Brocade Communications Systems Inc, 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 sources said.

The combination of Broadcom and Qualcomm would create a colossus that controls key pieces required for any company that wants build a smartphone. Meanwhile, Qualcomm is in the process of acquiring NXP Semiconductors NV, 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 centers.

Although Qualcomm’s stock on Friday jumped 13 percent after Bloomberg first reported on Broadcom’s plan to make an offer, the shares lag other chip stocks and are well short of the highs from last year. Qualcomm traded above US$70 a year ago. That was before a raft of regulatory and legal challenges.

Apple in January filed a lawsuit accusing Qualcomm of illegally misusing its leading position in phone chips to unfairly bolster profits from technology licensing.

Qualcomm management last week said that the Apple suits would play out on court timetables, suggesting they are not to be resolved soon.

Apple is considering dropping Qualcomm components from future iPhones and iPads, which would deliver a significant blow to the chipmaker’s sales, sources familiar with the matter have said.

Regulatory actions and investigations all over the world have raised concerns among investors. Qualcomm was slapped with record fines in Taiwan and South Korea and an antitrust suit by the US government.

Qualcomm has its own mega deal to worry about. The US$47 billion purchase of Netherlands-based NXP would be Qualcomm’s biggest ever.

However, it might be delayed until next year due to government scrutiny, particularly from the EU and China, the companies have said.

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

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