Broadcom makes offer to acquire Qualcomm in record $103bn deal

6 Nov 2017

Broadcom facility in Silicon Valley. Image: Ken Wolter/Shutterstock

This merger could see the creation of the third-largest chipmaker in the world.

Broadcom today (6 November) revealed a $103bn takeover bid for Qualcomm, a move that would see the creation of a new giant in the chip-making world.

Qualcomm’s chips and patents affect almost every smartphone model in the world, and Broadcom is offering $70 a share, which is a 28pc premium on Qualcomm’s closing stock price last Thursday (2 November), according to a report in The New York Times.

The acquisition would be the largest ever in the technology industry.

According to CNBC, Broadcom brought the offer to Qualcomm privately more than a year ago but was rebuffed. According to reports, people involved with Broadcom believe that it will not shy away from initiating a “proxy fight to gain seats on Qualcomm’s board of directors in support of its offer”.

A rejection from Qualcomm is likely

It is likely that Qualcomm will reject the bid, as it believes that its value is far below what the company is worth. It is firm that its pool of patents remains a highly valuable asset and its work on defining 5G network roll-out deserves a larger price.

Qualcomm’s recent $38.5bn takeover of NXP Semiconductors is also a factor that the company believes Broadcom has not accounted for in terms of the amount it is offering.

In a statement, the company said: “Qualcomm board of directors, in consultation with its financial and legal advisers, will assess the proposal in order to pursue the course of action that is in the best interests of Qualcomm shareholders.” The statement said that there would be no further comment from the company until the assessment was completed.

If the acquisition were to be successful, the merged companies would sit at third place in the chip-making industry, behind Intel and Samsung at second and first place, respectively.

A strategic play from Broadcom

Hock Tan, president and CEO of Broadcom, said in a statement: “This complementary transaction will position the combined company as a global communications leader with an impressive portfolio of technologies and products.

“We would not make this offer if we were not confident that our common global customers would embrace the proposed combination.’’

Many analysts are saying Broadcom is making the play while Qualcomm’s business is weaker than usual, as it continues its legal battle with Apple. Qualcomm saw its shares tumble as Apple threatened to remove the former’s chips from its smartphones.

Broadcom facility in Silicon Valley. Image: Ken Wolter/Shutterstock

Updated, 9.32am, 14 November 2017: This article was updated to amend a figure in relation to Broadcom’s offer.

Ellen Tannam was a journalist with Silicon Republic, covering all manner of business and tech subjects