Broadcom plans record tech deal with Qualcomm bid

Tuesday, 07 Nov, 2017

As of Monday, shares of Qualcomm are still about 8% lower than the $70 per share offer price.

The proposed deal would see Broadcom paying a 28% premium on shares for its rival but is reliant on Qualcomm completing its $38 billion takeover of NXP, which has yet to close.

Hock Tan, president and CEO of Broadcom, said in a statement: "This complementary transaction will position the combined company as a global communications leader with an impressive portfolio of technologies and products".

Following rumors over the weekend, chipmaker Broadcom has today confirmed it has approached wireless chipmaker Qualcomm with an acquisition offer that values the company at $130BN (including $25BN of net debt).

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These two companies came close in 2014 about the merging, but later due to some regulatory concerns called it off. T-Mobile has been making market share gains since launching its Un-carrier strategy a few years ago.

It is likely that Qualcomm will reject the bid, as it believes that its value is far below what the company is worth.

Many analysts are saying Broadcom is making the play while Qualcomm's business is weaker than usual, as it continues its legal battle with Apple and saw its shares tumble as the company threatens to remove its chips from its smartphones. NXP is one of the largest makers of chips for vehicles and expanding into self-driving technology, and Broadcom also is open to acquiring NXP, according to one of the sources. The forward price-to-earnings ratio for Broadcom recently stood at 14.6, slightly above its 13.5 average. Broadcom primarily focusses on Wi-Fi and Bluetooth chips.

That will help it avoid a cumbersome federal review process for a $5.5 billion deal for US network provider Brocade Communications Systems. In part this might be inspired by Qualcomm's pending release of the Centriq family of processors seeing as how Broadcom cancelled their ARM based server chip development earlier this year.

"Broadcom's proposal is compelling for stockholders and stakeholders in both companies".