Qualcomm Rejects $121 Billion Offer from Broadcom

QualcommQualcomm Incorporated's Board of Directors has unanimously rejected the revised non-binding, unsolicited proposal by Broadcom (NASDAQ: AVGO) to acquire all of the outstanding shares of Qualcomm for $82.00 per share ($60.00 in cash and $22.00 in Broadcom stock i.e approx. $121 Billion), which Broadcom announced on February 5, 2018.

The Qualcomm Board, assisted by its financial and legal advisors, determined that the Broadcom proposal materially undervalues Qualcomm and falls well short of the firm regulatory commitment the Board would demand given the significant downside risk of a failed transaction. However, Qualcomm has offered to meet with Broadcom to see if it can address the serious deficiencies in value and certainty in its proposal. They have asked Broadcom to be prepared to answer a few key question:

What is the true highest price at which they would be prepared to acquire Qualcomm?  Is it $82 per share or is it higher?  According to Qualcomm the current proposal is inadequate as it materially undervalues Qualcomm. The proposal value the expected NXP acquisition, nor does it value their expected resolution of current licensing disputes and its adds no value for the significant opportunity in 5G that Qualcomm will stand to benefit from.  Qualcomm feels the proposal is inferior relative to their prospects as an independent company and is significantly below both trading and transaction multiples in our sector. 

Is Broadcom willing to commit to take whatever actions are necessary to ensure the proposed transaction closes?  This is extremely important to value preservation for Qualcomm shareholders. The differences in their business models expose the Company to significant customer and licensee risk between signing and closing an agreement. It is indisputable that there are significant regulatory hurdles in the proposed transaction. It is also indisputable that if Qualcomm entered into a merger agreement and, after an extended regulatory review period the transaction did not close, Qualcomm would be enormously and irreparably damaged. If they are not willing to agree to do whatever is necessary to ensure a transaction closes, Qualcomm wants them to be extremely clear and specific about exactly what actions they would refuse to take, so that we can properly evaluate the risk to their shareholders.

On November 13, 2017, Qualcomm’s Board of Directors unanimously rejected Broadcom’s non-binding, unsolicited proposal to acquire Qualcomm for $70.00 per share ($60.00 in cash and $10.00 in Broadcom stock). On December 4, 2017, Qualcomm’s Board of Directors unanimously determined not to nominate any of the 11 candidates assembled by Broadcom and Silver Lake Partners to replace Qualcomm’s current directors at Qualcomm’s 2018 Annual Meeting.

Qualcomm continues to believe its highly qualified directors are best positioned to create near- and long-term stockholder value, while electing Broadcom’s hand-picked nominees is not in the best interest of Qualcomm stockholders.

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