Broadcom, one of the biggest semiconductor companies in the world, has reportedly offered to acquire Qualcomm in an unsolicited offer that could be the biggest tech deal in history. Broadcom is offering $70 a share. $60 per share is to be offered in cash while the remaining $10 will be in stocks. The deal values Qualcomm at $130 billion which includes $25 billion in net debt.
The offer comes just a few days after Broadcom’s CEO, Hock Tan, announced that the company will be relocating to the US from its current base in Singapore. The move would soften regulatory oversight on the deal.
The US government has always scrutinized deals between foreign and local US companies. The planned relocation could be a strategic move by Broadcom or just a mere coincidence but nonetheless, their acquisition offer has raised eyebrows across the tech scene.
Reports indicate that Broadcom has been working on this offer for some time. The proposal is part of a bold strategy that aims to make Broadcom one of the major suppliers of communication chips in the world. If the deal goes through, it would make Broadcom the third-largest chip maker in the world just behind Samsung and Intel.
A statement released by Hock Tan noted that the deal was meant to offer Qualcomm shareholders a significant premium in cash for their shares. Broadcom’s CEO also added that the deal offered an opportunity for shareholders at Qualcomm to benefit from the upside potential of the combined company.
Tan said that combining the two companies will present an impressive portfolio of technologies to its global customers. The merger would also be welcomed by the global customers served by the two companies.
The speculation about a possible Qualcomm takeover started last week. On Friday, Qualcomm shares trading on NASDAQ surged more than 12%, eventually closing at $61.81 per share. On Monday, the shares also gained 4% in premarket trading to hit $64.43. Before the 12% surge on Friday, Qualcomm shares were trading at $54.84. The proposed Broadcom deal ($70 per share) is looking to offer a 27.8% increase in share value compared to the $54.84 price that was recorded just before the news on the potential takeover broke.
Although the initial offer has been rebuffed, it’s not the end of it. Reports indicate that Broadcom will likely try to bring the attention of Qualcomm’s shareholders towards this deal. Broadcom is also not ruling out a possible proxy fight to gain a say in Qualcomm’s board of directors.
A statement from Qualcomm on Monday confirmed that the offer had been received and it was being assessed. The company is, however, expected to resist it. Qualcomm feels the $130 billion valuation is not good enough for a potential takeover. Whether there will be counteroffers or not remains to be seen but it looks like this story has just started.