Broadcom offers $121 billion to Qualcomm

Broadcom Ltd made a $121 billion ‘best and final offer’ on Monday, February 5, to acquire Qualcomm Inc, which is building up the pressure on its US semiconductor peer to engage in talks on what would be the biggest ever technology acquisition.

The takeover battle is at the heart of a race to consolidate the wireless technology equipment sector, as smartphone makers such as Apple Inc and Samsung Electronics Co Ltd use their market dominance to negotiate down chip prices.

Broadcom’s new $82 per share offer included $60 in cash and $22 in Broadcom stock. Its first offer, of $70 per share, in November comprised $60 in cash and $10 in stock. The increased stock component would subject the deal to a Broadcom shareholder vote.

Qualcomm shares fell 4.3 per cent to $63.20 at mid-afternoon on doubts about the deal’s prospects, as well a KGI Securities report that said Apple might drop the chipmaker in favour of Intel Corp to supply modem chips for its next-generation iPhones.

“Qualcomm and its board now have a tough decision, as this is a compelling offer in our opinion,” said analyst Daniel Ives of GBH Insights.

Singapore-based Broadcom is mainly a manufacturer whose connectivity chips are used in products ranging from mobile phones to servers. Qualcomm primarily licenses its technology for the delivery of broadband and data, a business that would significantly benefit from the rollout of 5G wireless technology. But Qualcomm is locked in a patent dispute with Apple over its licensing agreements.

Qualcomm expects China’s blessing later this month, at which point it has to decide whether it would raise its offer.

At Qualcomm’s March 6 shareholder meeting, Broadcom plans to nominate a slate of directors to replace Qualcomm’s board. That remains the company’s focus unless Qualcomm agrees to negotiate, Tan said.