Broadcom’s Acquisition Bid To Be Rebuffed By Qualcomm

Sources indicate that chipmaker Qualcomm intends to reject a takeover bid by Broadcom this week, a move that is likely to ignite a dramatic acquisition battle. The board of directors of Qualcomm were expected to meet on Sunday with the agenda being to conduct a review of the unsolicited acquisition offer before deciding on a strategy. According to the sources Qualcomm will claim that is bid is not sufficient as a preliminary response before spending more time deliberating on a full response.

It is understood that the chief executive officer of Qualcomm, Steven Mollenkopf, has been holding discussions with shareholders of the chipmaker with a view to seeking their opinion. Mollenkopf apparently is of the view that the $70-per-share bid that Broadcom has offered grossly undervalues Qualcomm and does not take into account the uncertainty posed by regulators as they might prove to be a roadblock in the acquisition quest.

From Singapore to United States

Earlier in the month the chief executive officer of Broadcom, Hock Tan, indicated that he would be redomiciling the chipmaker from Singapore where it is currently based to the United States. Tan has also indicated that a takeover battle is on the cards. According to the sources Broadcom is making preparations to nominate directors to the board of Qualcomm before next month’s deadline. Consequently this would allow the shareholders of Qualcomm to vote with a view to replacing the board and forcing an engagement with Broadcom.

Additionally there have been deliberations at Broadcom with a view to raising the bid that has been placed for Qualcomm. This includes increased debt financing per the sources. However the sources did not indicate the exact time that Broadcom would make the move.

Patent battle

Qualcomm, which makes chips used in the delivery of mobile and broadband data for mobile networks, is currently embroiled in a patent feud with Apple. The chipmaker has also launched an acquisition bid for NXP Semiconductors NV, a maker of automotive chips, worth $38 billion, following the signing of a deal last year in October. Broadcom placed a bid of $103 billion for Qualcomm. All indications from Broadcom are that the acquisition bid for Qualcomm will remain regardless of whether the NXP deal is closed.

“We would not make this offer if we were not confident that our common global customers would embrace the proposed combination, and we do not anticipate any material antitrust or other regulatory issues,” Tan said when news of the acquisition bid first became public.

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