Associated Press Broadcom has offered to buy rival chipmaker Qualcomm for $103 billion. Many analysts believe the transaction would draw intense regulatory scrutiny as the combined company would have about 40 percent of cellphone chip marker.
Tuesday, November 07, 2017 1:00 am
Broadcom makes offer to buy rival
NEW YORK – Broadcom made an unsolicited $103 billion offer for rival chipmaker Qualcomm, the tech industry's largest attempted takeover that is destined to come under intense regulatory scrutiny.
Qualcomm, known to many consumers as the maker of Snapdragon chips found in smartphones and tablets, is already the No. 3 chip supplier, according to research firm Gartner, trailing only Intel and Samsung. A combination with Broadcom would not change that.
But a transaction between the two would likely raise antitrust concerns, analysts said. The combined company would have about 40 percent of the cellphone chip market, said Stifel analyst Kevin Cassidy.
Moreover, it would create a company with “massive market share” in the kind of chips that power Wi-Fi, location data and Bluetooth, necessary for the next generation of connected devices, said Stuart Carlaw, chief research officer at ABI Research. That could make it more expensive to incorporate such technologies in new areas, such as electric car infrastructure and “smart” utility grids, slowing their development, he said.
Broadcom said Monday that it was confident that “common global customers” would embrace the deal. While it did not specify particular companies, Qualcomm and Apple have been in a long-running legal battle over licensing fees owed to Qualcomm.
Analysts say that dispute has weighed on Qualcomm's stock price. Hooking up with Broadcom might lead to a faster resolution of that dispute because of Broadcom's good relationship with Apple, said Canaccord Genuity analyst Michael Walkley in a Monday note.
Still, analysts expect Qualcomm management to reject the $70-per-share price Broadcom is offering as too low. Qualcomm said that it is reviewing the bid, and that it will have no comment until that review is completed by its board.
The Broadcom offer of $70 per share to Qualcomm stockholders would be $60 per share in cash and $10 per share of Broadcom. Qualcomm has 1.47 billion shares outstanding.
Broadcom says its proposal is a 28 percent premium over the closing price of Qualcomm common stock on Thursday, the last “unaffected” trading day for the companies.
It has also offered to pick up $25 billion in debt.
Broadcom Ltd., which has corporate headquarters are in San Jose, California, but a home address in Singapore, is currently taking steps that should make it easier to get deals done. It is relocating the home address to Delaware, a decision announced last week.
Qualcomm, based in San Diego, rode the boom in mobile.
Broadcom said if the deal is approved, it expected a combined company to have revenues of about $51 billion.
Last week, Qualcomm reported revenue of $22.3 billion for fiscal 2017.