Broadcom Offers $123 Billion For Qualcomm

Broadcom (NASDAQ: AVGO) has sweetened its bid for Qualcomm (NASDAQ: QCOM) in an effort to pressure Qualcomm’s board into considering the sale of the company. Under the terms of the deal, Broadcom would acquire all outstanding shares of Qualcomm for $60.00 in cash and $22 in Broadcom stock per share, as well as assume the company’s debt. The deal amounts to $123.9 billion including debt and represents a 50 percent premium over Qualcomm’s share price before the acquisition attempt.

Broadcom pledged to pay a “significant” breakup fee if a deal with Qualcomm is vetoed by regulators. Typically, such break-up fees equate to approximately 3 percent to 4 percent of a deal’s size. The company also said it would pay additional cash if the two companies have not closed a transaction a year after announcement. Broadcom has said it is very confident a deal can be completed within 12 months of signing an agreement.

Broadcom says that this proposal is its final offer. Broadcom CEO Hock Tan said, “Any rational board would consider what we’ve put forward.” Qualcomm released a statement saying its board would review the proposal “to determine the course of action it believes is in the best interests of the Company and its stockholders.” However, reports have emerged that Qualcomm’s leadership is fiercely opposed to the deal.

Broadcom has been pursuing a deal with the chip maker for the past three months. It first made an unsolicited, $103 billion offer for Qualcomm on Nov. 6. The previous offer consisted of $60 per share in cash and $10 per share in stock. Qualcomm’s board unanimously rejected that offer, saying it “dramatically undervalues Qualcomm and comes with significant regulatory uncertainty, and therefore is not in the best interests of Qualcomm stockholders.”

The merger would create a tech giant whose products would be used in nearly all of the world’s smartphones. Qualcomm is a wireless telecommunications giant that provides chips to mobile carrier networks to deliver broadband and data. Qualcomm’s collection of patents is one of the most valuable assets in the world of wireless telecommunications. The combined companies would generate about $51 billion in annual revenue.

The deal would be the largest-ever technology acquisition to date, eclipsing Dell’s acquisition of EMC for about $65 billion. The deal is subject to shareholder and regulatory approval. Last November, Tan announced that the company is moving its global headquarters to the U.S. That move would likely help in regulatory approval of this deal. Broadcom has also offered to sell overlapping businesses to help the deal gain approval.

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