Broadcom Eyes $120B Purchase Offer That Qualcomm May Find Hard To Refuse

Broadcom Eyes $120B Purchase Offer That Qualcomm May Find Hard To Refuse

Qualcomm in November rejected Broadcom's US$70 per share cash-and-stock bid that valued the company at US$103 billion.

In fact, Qualcomm's board concluded that the offer dramatically undervalued the company and presented significant regulatory uncertainty.

In a statement, Qualcomm said it has received the revised offer and its board will review it. The deal, if it goes through, could become the biggest in terms of the number of billions that Broadcom is prepared to give for Qualcomm.

Reports said past year that prominent Qualcomm shareholders could be intrigued by an offer of at least $80 per share, and the latest offer follows a report of sharply lower income amid the company's licensing fight with Apple. It has also proposed to pay Qualcomm a "reverse termination fee" of up to $10 billion if regulators block the deal. One was a report from Nomura analyst Romit Shah, who said Apple (aapl) is planning to drop chips from both Qualcomm and Broadcom in this year's next round of iPhone new models. Broadcom expects the deal to be consummated within 12 months of signing an agreement and is ready to pay a "ticking fee" if it is not.

Despite the 17% higher bid to near unprecedented territory for the stock, Qualcomm's stock price dropped more than 2% on Monday morning to $64.55. This also happens to be Broadcom's "best and final offer", so if Qualcomm doesn't accept, that's (probably) the end of this whole ordeal. The extra dosh comes out to $60 in cash per Qualcomm share and the remainder in Broadcom shares. It said it would cease its pursuit of Qualcomm if a definitive agreement hadn't been reached by the firm's March 6 annual shareholders meeting or its slate of candidates for the board of directors wasn't elected.

Qualcomm responded that it would consider the offer, but declined to comment further. Qualcomm counters that the regulatory review processes required around the world would take more than 18 months and be fraught with risks.

Broadcom also said it is prepared to pay a significant termination fee if the deal can not obtain the required government regulatory approvals.

In its fight against the hostile takeover, Qualcomm has argued that future growth prospects are strong as it pushes into new markets beyond smartphones, including personal computers, computer servers, automotive semiconductors, radio frequency chips and the Internet of Things gadgets.

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