Broadcom Increases Qualcomm Bid

Broadcom increased its bid for rival chipmaker Qualcomm on Monday and the deal will likely generate some $3 billion in cost synergies if it does well.

The company  has raised its bid for Qualcomm to about $121 billion, in an attempt to force what could be the largest-ever technology deal.

The new offer of $82 a Qualcomm share will be Broadcom’s “best and final,” according to a statement. The deal would take the form of $60 in cash and the remainder in Broadcom shares. That would represent a 50 percent premium over the price Qualcomm was trading at on Nov. 2, before news of the approach broke, Broadcom said.

That would probably mean cutting thousands of jobs, running counter to the pro-jobs agenda of the White House. That could strain the friendly relationship between Broadcom and the Trump administration.

President Donald Trump in November publicly thanked Broadcom CEO Hock Tan for returning the company's headquarters to the United States and Tan in return praised the then-forthcoming tax overhaul.

Qualcomm’s board previously rejected Broadcom’s original $105 billion acquisition approach, and has since buried the threat of a takeover, with Chief Executive Officer Steve Mollenkopf dismissing the bid as not being worth of consideration. 

Qualcomm has also argued that regulators would be doubtful to quickly, if ever, approve such a combination.

Broadcom Chief Executive Officer Hock Tan is now putting pressure back on Mollenkopf and his board, who have so far refused to negotiate. By sweetening the offer, he’s also improving the prospects for his nominations to Qualcomm’s board in a shareholder vote next month. A victory in that effort would call off the current opposition.

Qualcomm confirmed receipt of the revised proposal and said it would review the offer before responding.

Broadcom’s offer will include a payout to Qualcomm in the event that it can’t get the transaction approved by regulators, and a provision under which it pays more cash if the process drags beyond the year it thinks it will take. That’s an attempt to diffuse one of the key objections that Qualcomm has offered in not accepting the approach.

Broadcom didn’t specify the exact amounts of the two forms of compensation, but called them “significant.”

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