Qualcomm poised for fight with Broadcom

A sign is posted at a Qualcomm office on November 1 in San Jose California. – AFP
A sign is posted at a Qualcomm office on November 1 in San Jose California. – AFP

07 November, 2017

Semiconductor vendor Broadcom is on the verge of making a $130bn (£99bn) bid for chip maker Qualcomm in what would be the largest technology takeover ever, according to reports.

Broadcom said its proposal stands irrespective of Qualcomm's acquisition of NXP goes through or not. We note that Broadcom's bid is independent of Qualcomm's success in closing its bid for NXP.

Specifically Broadcom is offering to pay $70.00 per Qualcomm share, with $60.00 being in cash and $10.00 per share in Broadcom shares. Qualcomm apparently isn't happy with the offer, with Bloomberg saying that Qualcomm thinks the deal "undervalues the company".

Tan visited President Trump at the White House last week to announce that Broadcom would be moving its headquarters from Singapore to Delaware.

That will help it avoid a cumbersome federal review process for a $5.5 billion deal for USA network provider Brocade Communications Systems.

Shah believes Broadcom would encourage Qualcomm to complete its NXP acquisition as it has extensive distribution channels, scale and exposure to the fastest growing segments in automotive, where Broadcom is underpenetrated.

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Qualcomm shares, which traded over $70 as recent as December 2016, closed at $61.81 on Friday.

The proposed deal comes at a time when there has been significant consolidation within the chipset market, driven by greater demand for smartphones and connected devices.

Broadcom said if the deal is approved, it expected a combined company to have revenues of about $51 billion.

"This complementary transaction will position the combined company as a global communications leader with an impressive portfolio of technologies and products", Hock Tan, resident and chief executive officer of Broadcom, said in a statement Monday.

Antitrust concerns over a Broadcom-Qualcomm deal also may be muted because the companies have few areas of overlap beyond Wi-Fi solutions for wireless routers, Bluetooth drivers and some RF semiconductors, said Rob Lineback, a research analyst at IC Insights.

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