Qualcomm Turns Down Broadcom’s Increased Bid Offer

Qualcomm Inc.’s board unanimously turned down a higher acquisition offer from Broadcom Ltd., spurning the largest technology takeover bid in history.

The U.S. semiconductor company on Thursday rejected Broadcom’s revised $121 billion buyout offer, but proposed meeting its peer to see whether they can address what it called the bid's "serious deficiencies in value and certainty."

Qualcomm's response tries to strike a balance between constant resistance of Broadcom's takeover attempt and heeding the calls of some Qualcomm shareholders, who urged the company in recent days to engage with its rival in case it can finalize an attractive deal.

Qualcomm had rejected Broadcom's first unsolicited $103 billion acquisition offer in November, without engaging further. In response, Broadcom nominated a slate of directors to replace Qualcomm's board.

The offer “materially undervalues” Qualcomm and "falls well short of the firm regulatory commitment” needed to gain approval for such a transaction, the San Diego-based company said Thursday in a statement. Broadcom reiterated on Friday that its $82 a share proposal is its “best and final” bid, urging the target to meet this weekend. 

The deal would take the form of $60 in cash and the remainder in Broadcom shares, a bump of 17 percent from its opening offer in November of $70 a share, which Qualcomm also turned down.

Qualcomm offered to meet with Broadcom and provided a list of issues to address in order to further the conversation. Still, Qualcomm’s second dismissal of Broadcom’s approach may put the decision in the hands of shareholders, who will vote March 6 on whether to replace the smartphone-chip maker’s board with Broadcom’s own nominees.

The vote will represent a choice between Broadcom’s strategy, under Chief Executive Officer Hock Tan, of acquiring companies and focusing on boosting profits, or Qualcomm management’s promise of future growth fueled by investment in new products and technology.

"Your proposal is inferior relative to our prospects as an independent company and is significantly below both trading and transaction multiples in our sector," Qualcomm Chairman Paul Jacobs wrote in an open letter to Broadcom’s Tan.

Tan said in a letter to Qualcomm that it was “astonished” the company wasn’t willing to meet until Tuesday and said the offer includes an $8 billion regulatory reverse termination fee.

Even though Broadcom has promised to pay a large breakup fee in the event regulators thwart the deal, as well as a "ticking" fee if the deal takes more than 12 months to close, Qualcomm believes Broadcom needs to offer a "hell-or-high-water" legal commitment to complete the deal regardless of divestitures that antitrust watchdogs around the world may require.

"If you are not willing to agree to do whatever is necessary to ensure a transaction closes, we will need you to be extremely clear and specific about exactly what actions you would refuse to take, so that we can properly evaluate the risk to Qualcomm's shareholders," Jacobs wrote to Tan in an open letter.

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