Broadcom issued an unsolicited proposal this morning to acquire mobile technology giant Qualcomm for $70 per share in a monster cash-and-stock deal that's valued at $130 billion. Broadcom president and CEO Hock Tan says the combined companies would stand "as a global communications leader with an impressive portfolio of technologies and products." Broadcom CFO Thomas Krause touts his company's "proven track record of rapidly deleveraging and successfully integrating companies to create value for our stockholders, employees, and customers" in a rosy vision for the deal. Were it to close, the offer would dwarf Dell's $67 billion merger with EMC that closed in September of last year.
Qualcomm should be a household name to many TR readers. The company designs the Snapdragon mobile platforms that power Android handsets ranging from entry-level to flagship-class, and it also provides the cellular modems that go into some iPhones, among many other technologies. Recently, though, Qualcomm has become embroiled in a bitter patent-licensing dispute with Apple, a fight that's raged as it attempts to take over NXP Semiconductor in a $38 billion bid for that company's wide-ranging product portfolio. Broadcom's offer is not contingent on the outcome of the bid to acquire NXP, according to its press release.
The Apple dispute battered Qualcomm's financial results in the third and fourth quarters of this year as it struggled to collect the royalties due from the iPhone maker and another licensee. Further stormy seas arrived in the form of a $778 million fine from the Taiwan Fair Trade Commission that the company is now recording in its financial results as a one-time charge. Amid the turmoil, Qualcomm shares fell as low as $49.64 in September, well off their $66.88 high at the beginning of the year.
Bloomberg reports the Snapdragon maker plans to reject the bid as "an opportunistic move to buy the company on the cheap," according to its sources. Bloomberg further claims that Qualcomm will attempt to persuade its shareholders that the takeover attempt could result in a prolonged battle with its board and a long series of regulatory hurdles that would ultimately undermine the value of the proposed deal.
Were the deal to pass muster with Qualcomm's shareholders, the combined Broadcomm, Qualcomm, and NXP behemoth would boast pro forma revenue of about $51 billion and pre-tax profits of $23 billion, according to Broadcom's documents. For comparison, Intel reported $59.4 billion of full-year revenue and operating income of $16.5 billion in its fiscal 2016, while Samsung Electronics posted $48 billion in fiscal 2016 revenue and $8.3 billion in operating income at today's exchange rates.
For its part, Qualcomm has confirmed receipt of the offer and says it plans to "assess the proposal in order to pursue the course of action that is in the best interest of [its] shareholders." We'll be waiting with bated breath for more news.