Broadcom raises offer to buy Qualcomm to $121 billion


Addenda Capital Inc. Decreases Position in Broadcom Ltd (NASDAQ:AVGO)

Broadcom made its latest offer conditional on Qualcomm closing that deal at the current offer price, or walking away from the deal: It's OK with raising its own bid, but doesn't want its target spending any more money. Qualcomm has so far dismissed any overtures from Broadcom and accused the company of opportunistic swoops as Qualcomm is locked in a tense dispute with Apple, but did not immediately reject the new offer on Monday.

Qualcomm shares fell 4.3 percent to $63.20 at mid-afternoon on doubts about the deal's prospects, as well a KGI Securities report that said Apple might drop the chipmaker in favor of Intel Corp to supply modem chips for its next-generation iPhones.

Broadcom has been aggressively pushing to buy out its rival, Qualcomm for quite some time. Broadcom is also inviting two board directors of Qualcomm, including board chairman Paul Jacobs, to join the board of the combined company.

Like Broadcom's offer for Qualcomm, that deal had been financed by a combination of cash and shares.

The deal would involve $60 in cash per Qualcomm share and the remainder in Broadcom shares.

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Broadcom says that its offer is premised on two conditions. In comparison, the largest tech acquisition to date saw Dell acquire EMC a couple of years ago for a cash-and-stock total of $67 billion.

Broadcom now has twin corporate headquarters in San Jose and Singapore, which came from Singapore-based chipmaker Avago Technologies' takeover past year of Broadcom, whose name it took.

Qualcomm had previously rejected Broadcom's $103bn (£73bn) buyout proposal, which it said "dramatically undervalued" the company. Qualcomm's chips are in iPhones, Android smartphones and new "always-on" Windows laptops. "With the deal contingent upon NXP at $110 or not at all, Qualcomm's Board of Directors can hinder the potential of a takeout by raising the bid for NXP, closer to the $135 value that NXP activists have been pushing for". Qualcomm's revenue, gross profit, earnings before taxes, and net income all shrank over the past three years while growing on average at peer companies, Broadcom noted.

"It's clear they [Broadcom] really want Qualcomm", said Holger Mueller, principal analyst and vice president of Constellation Research Inc.

Broadcom promised to pay a "significant reverse termination fee" if it does not receive regulatory approval for the deal.

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