Wednesday, 21 February, 2018

Broadcom presents 'best and final' offer for Qualcomm

Qualcomm Falls Amid Concern Broadcom's Bid Will Fail Analysts believe Broadcom's new offer price is still below what Qualcomm is prepared to accept
Nellie Chapman | 07 February, 2018, 05:16

Broadcom has sweetened its offer for Qualcomm to US$121 billion - its "best and final offer" - to buy the United States semiconductor peer as it tries to get it back to the negotiation table.

In a statement, Qualcomm said it has received the revised offer and its board will review it.

The new offer would pay Qualcomm shareholders $60 per share in cash and $22 in Broadcom stock.

In November, Broadcom offered $70 per share to acquire Qualcomm, which the company's board rejected as too low. Broadcom's offer is contingent on the the deal going through.

Reuters first reported on Broadcom's new offer on Sunday.

Qualcomm shares dropped 4.3 percent to USD63.20 at mid-afternoon on doubts about the deal's prospects, in addition to a KGI Securities report that said Apple might give up Monday the chipmaker in favor of Intel Corp.

Broadcom shares edged up 0.2 percent to $235.77. Further, the analyst said that though Qualcomm offers solid technology, Intel's modem costs less and yet meets Apple's standard, according to Fortune. Applications for our products in these end markets include: data center networking, home connectivity, set-top box, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems, and electronic displays.

Qualcomm, which has locked horns with Apple over patent licensing practices, sells both chips and charges a patent royalty for almost all smartphones sold globally. Broadcom, which has begun a process to reincorporate in the United States, called the hostile bid its "best and final offer". If the company can pull that off, he wrote, "we continue to believe Qualcomm's revenue has potential upside from licensing revenue". Broadcom raised the stakes just a month prior to Qualcomm's annual shareholder meeting, at which it hopes to sweep the entire board clean, as The New York Times reports.

Broadcom said it was willing pay Qualcomm a "ticking fee" if the transaction is not completed within its target of 12 months after any definitive agreement.

"There is no antitrust issue. People talk about us making even more commitments on the regulatory front, like adding hell-or-high water provisions, which are not a very well defined legal standard, and we chose not to include it because it would not add much incremental certainty", said Tan. The NXP deal still faces an uncertain future as some of its shareholders, including activist hedge fund Elliott Management Corp, have asked Qualcomm to raise its offer. European regulators this month said they had approved the merger subject to conditions. It was expected that the offer would be revised. It also doesn't want Qualcomm to delay or adjourn its annual meeting past March 6. That remains the company's focus unless Qualcomm agrees to negotiate, Tan said.

"Given Qualcomm's broken promises, should investors believe Qualcomm can accurately project two years forward?", Broadcom said in its pitch to shareholders.