Qualcomm said it is an unsolicited bid. The company would examine the potential of the offer and will decide. Financial Times reports that Qualcomm would reject the bid since the deal does not make sense for the promoters and shareholders of the US-based Qualcomm.
Wire agency Bloomberg, which earlier broke the news, reported that Broadcom offered about $105 billion for rival Qualcomm, kicking off an attempt at the largest technology takeover ever in a deal that would rock the global electronics industry.
Intel and Samsung may be the biggest losers if Broadcom combines the business of rival Qualcomm. Broadcom will become the third-largest chipmaker in the world, behind Intel and Samsung gaining much in the smartphone business.
Broadcom and Qualcomm, including NXP, will have fiscal 2017 revenues of $51 billion and EBITDA of $23 billion. Silver Lake Partners has provided $5 billion convertible debt financing to Broadcom for the Qualcomm deal. Broadcom has already completed five major acquisitions since 2013. The deal will be a major exit route for Irwin Jacobs and family.
Recent chip deals
# Softbank’s $32 bn takeover of ARM
# Intel’s $17 bn purchase of Altera
# Qualcomm’s $39 bn bid for NXP
Business daily Financial Times reported Qualcomm shareholders would receive $70 per share — $60 in cash and $10 in shares of its rival. It would value Qualcomm’s equity at roughly $103 billion.
Broadcom said that its offer stands whether or not Qualcomm completes its $38 billion acquisition of NXP.
“This complementary transaction will position the combined company as a global communications leader with an impressive portfolio of technologies and products,” said Hock Tan, resident and chief executive officer of Broadcom.
If completed, it would be the biggest ever takeover in the technology sector and create a company with a combined market capitalization of more than $200 billion.
The deal will dwarf Dell’s $67 billion acquisition of EMC in 2015 — then the biggest deal in the technology industry.
The proposed transaction is valued at approximately $130 billion on a pro forma basis, including $25 billion of net debt.
Broadcom is trying to utilize the current issues faced by Qualcomm. Qualcomm’s most profitable unit, which licenses mobile phone technology, is under assault from regulatory actions and a legal challenge from device maker Apple.
If Apple decides to stop buying Qualcomm chips for use in iPhone smartphones and other products, the decision will be a major blow to Qualcomm’s revenue. Apple is one of the main customers of Broadcom as well.
Qualcomm is attractive to Broadcom because Qualcomm’s 5G initiatives in the recent past.
Broadcom’s Tan has played a major role in a wave of consolidation engulfing the $300 billion semiconductor industry over the last three years.
He took a former Hewlett-Packard division and built it into one of the largest chipmakers through a string of purchases. Tan established the current iteration of Broadcom in 2016 when his Singaporean company Avago Technologies acquired U.S.-based Broadcom for $37 billion.
Tan, who holds degrees in mechanical engineering from the Massachusetts Institute of Technology and an MBA from Harvard Business School, said he will move Broadcom’s headquarters to the U.S. — in a widely broadcast announcement on Thursday with U.S. President Donald Trump in the Oval Office.
Broadcom is yet to complete its $5.9 billion takeover of Brocade Communications announced last November due to regulatory issues in the U.S.