Qualcomm vs. Broadcom Battle Heads To Shareholder Vote

The Qualcomm versus Broadcom battle has been ongoing since Broadcom’s initial offer to buy Qualcomm last November, 2017 for $60 a share in cash plus $10 a share in Broadcom stock. Broadcom’s initial offer of $70.00 per share was seen by Qualcomm’s Board as being so low that the hostile takeover bid did not merit engagement. Qualcomm has emerged as a leader in semiconductor technology in recent years and is helping shape the development of standards for 5G, the next generation of wireless technology.

Qualcomm Logo

Broadcom couldn’t take no for an answer and on February 5, 2018 placed its ‘best and final offer’ for Qualcomm at $82.00 per share. The offer was cash and shares offer, that includes $60 in cash and $22 in AVGO shares. The offer also required that Qualcomm either complete the NXP Semiconductors (NXP) transaction at $110 or walk away. This takeover offer for Qualcomm would be the largest tech deal ever at $121 Billion. Qualcomm rejected Broadcom’s sweetened bid of $82 a share on the grounds that it undervalued the company and fell short of necessary regulatory commitments. A deal of this size would mean that Broadcom would have to win antitrust approval.

Qualcomm then on February 20, 2018 increased their bid for NXP Semiconductors to $44 billion or $127.50 per share. NXP is a Dutch corporation that makes chips for German passports and that might be critical down the line as European officials have ownership concerns.  Broadcom then cut its offer to by 4 percent to $117 billion ($79 per share) due to Qualcomm’s increased offer for NXP Semiconductors, but would revert to $82 per share if Qualcomm was unable to complete the NXP acquisition. Under the new terms, Qualcomm shareholders would get $57 per share in cash and $22 per share in Broadcom shares. Broadcom’s credit ratings are weaker than Qualcomm’s, so if this deal moves forward it means that Broadcom would have to dig deeper. Some believe that Qualcomm could have overpaid for NXP on purpose to end the Broadcom hostile takeover.

Broadcom Ltd Logo

Now the two rivals are headed toward a March 6 showdown in which Qualcomm shareholders are scheduled to vote on a slate of six ‘independent directors’ nominated by Broadcom.  If Broadcom’s nominees take control of the Qualcomm board they could force the company to agree to a deal. The Qualcomm Board believes it is not in the best interest of Qualcomm’s stockholders to elect Broadcom’s nominees and is urging shareholders to vote for the WHITE proxy card. Voting with the BLUE proxy card will elect all six Broadcom nominees.

The Qualcomm 2018 Annual Meeting of Stockholders is to be held March 6, 2018, so Qualcomm’s shareholders will vote and determine the future of the company. Broadcom’s $117 billion bid, the largest ever in the semiconductor industry, most certainly has the attention of the world right now. Some US politicians have called for the Committee on Foreign Investments in the United States (CFIUS) to review the potential takeover citing concerns that a Broadcom acquisition may lead to critical pieces of Qualcomm being sold off. That in turn could result in the U.S. falling behind China when it comes to developing cutting-edge advancements in the tech sector. That is how important the development of 5G wireless technology is!

At the end of the day  it is clear that the United States is in a race with China for the development of 5G technologies. The winner will shape U.S. telecommunications infrastructure and obviously U.S. national security is also a concern here.