Qualcomm rejects Broadcom's $103 billion offer

Alfred Osborne
November 15, 2017

But Broadcomm has vowed to continue pursuing its proposed acquisition.

Qualcomm announced late last night that its board of directors had "unanimously rejected" Broadcom's record-breaking offer, having agreed that the $70 per share bid "dramatically undervalues Qualcomm" and "comes with significant regulatory uncertainty". Indeed, insiders had suggested that the company had considered offering as much as $80 per share in its opening bid - implying that it has room and resources to dramatically raise its offer.

The company's decision to decline what would be the biggest-ever tech deal simply postpones the inevitable proxy battle that will ultimately decide the fate of the chipmaker.

Why? Well, for the simple reason Qualcomm believes it's worth more money. We think Qualcomm is also aiming for a higher offer more in line with recent acquisition premiums relative to management's view of the firm's true valuation.

Broadcom restated its intention to get Qualcomm to come to terms, noting that its previous offer-which consisted of $60 in cash and $10 in Broadcom stock per share-marked a 28% premium over the closing price of Qualcomm's shares on November 2, the last day to have been unaffected by media speculation of a deal.

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If Broadcom makes a hostile bid, Qualcomm's governance rules would allow the rival to submit its own slate for the entire 11-member board by the December 8 nomination deadline.

What Broadcom could do to force Qualcomm's hand is to submit a roster of directors who are friendly to them by Qualcomm's December 8 deadline, so that they could then force the company to transact with Broadcom.

Overall, Broadcom's bid is a very ambitious attempt to grow its share of the market for components that go into mobile phones.

Any deal would face scrutiny from the antitrust regulators as the combined company would own the high-end WiFi business globally, analysts said.

Qualcomm's stock climbed 1.2% in premarket trading, while Broadcom declined 0.6%.

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