Yesterday, Broadcom, whose components are used in pretty much every Apple IPhone, proposed an offer worth around $130 Billion USD to takeover semiconductor and telecommunications giant Qualcomm. Broadcom has reportedly offered $60.00 cash value and $10.00 per share in Broadcom shares in exchange for all outstanding Qualcomm shares. While an offer is on the table for Qualcomm shareholders to consider, there are still a few hurdles to be cleared and there is no guarantee that regulators would allow the merger to even happen. Qualcomm currently has an offer in to acquire semiconductor company NXP and the Qualcomm proposed takeover would stand whether or not Qualcomm completes the NXT takeover, which is valued at $130 billion USD on a pro forma basis.
With details of the takeover outlined and approved by the Broadcom board of directors, the ball is currently in the court of Qualcomm (NASDAQ: QCOM), as they have to decide whether or not to accept the offer. Right now, Qualcomm is having back-and-forth legal issues with Apple, with Apple accusing Qualcomm of fraudulent royalty charges and Qualcomm accusing the Cupertino-based Apple of patent infringement. The current legal battle with Apple has affected Qualcomm stock. Things aren’t looking good for Qualcomm in terms of their legal battles, as they have been found guilty and fined $900 million by the Korean Fair Trade Commission for patent licensing antitrust violations, while the US Fair Trade Commission is currently in the process of suit with Qualcomm for monopolizing semiconductors in cell phones.
Broadcom has a pretty close relationship with Apple and a buyout of Qualcomm could see Apple go much more easier in litigation in order to keep good faith with Broadcom. Qualcomm shareholders have a lot of thinking to do, because if they don’t prevail in their lawsuit with Apple, the stock price could get even lower. Broadcom has an offer on the table based on current stock prices and the Qualcomm board has to decide whether or not they will be in a better position down the road if they don’t accept the buyout offer.