Broadcom, the California-based semiconductor company that provides WiFi and Bluetooth chip designs, proposed to buy its rival Qualcomm with a record-breaking bid that values the chip maker at $130 billion and if the deal is sealed then it would make the formed company third-largest chipmaker in the world after Intel and Samsung.
Broadcom revealed that it offered to buy the smartphone chip manufacturer for $70 per Qualcomm share. Shareholders will get $60 per share in cash and $10 per share in Broadcom shares. The company will arrange the necessary acquisition amount using debt financing. Major banks have agreed to finance Broadcom in its Qualcomm acquisition deal.
According to the company, its offer is at a premium of 28 percent over the closing price of Qualcomm’s common stock on Thursday, the day prior to media speculation regarding a potential transaction, and a premium of 33 percent on Qualcomm’s 30-day average price.
Qualcomm is in talks to acquire NXP Semiconductor NV and the $39 billion deal is currently in works. Qualcomm’s aim is to expand its business into self-driving technology and NXP Semiconductors NV is one of the largest automobile chips manufacturer.
In regard to the on-going deal between the two, Broadcom cleared it out that its offer is not dependent on whether Qualcomm’s acquisition goes through or not.
Qualcomm’s share price closed at $61.81 last Friday.
President and CEO of Broadcom Hock Tan described “greater scale and broader product diversification” as key strategic drivers for the acquisition offer. “The combined company will be positioned to deliver more advanced semiconductor solutions for our global customers and drive enhanced stockholder value.”
If Qualcomm accepts Broadcom’s deal then it would be the biggest ever company takeover in the technology sector. “We would not make this offer if we were not confident that our common global customers would embrace the proposed combination,” added Tan.
Update (November 14th) – Qualcomm has rejected Broadcom’s acquisition offer saying that the chip maker has undervalued the company and the deal would face regulatory issues. “We continue to believe our proposal represents the most attractive, value-enhancing alternative available to Qualcomm stockholders and we are encouraged by their reaction,” said Broadcom. The company may try to increase the value of its bid and engage with Qualcomm’s board members to make the acquisition happen.