Broadcom offers to buy Qualcomm in $130 billion deal
Broadcom has offered to buy US chip maker Qualcomm in a deal worth $130 billion.
On Monday, US wireless and broadband giant Broadcom said it would be willing to offer $70.00 per share in cash and stock.
In an investor release, the company said the offer would be given to Qualcomm shareholders through $60 in cash and $10 per share in Broadcom shares.
The price represents a 28 percent premium over the $54.84 closing price of Qualcomm common stock on Nov. 2, the day before rumors of a potential acquisition impacted the share price.
Qualcomm shares stand at $61.81 at the time of writing.
The pending acquisition of NXP Semiconductors by the US chip maker in a deal worth $47 billion isn't putting Broadcom off, either.
"The proposed transaction is valued at approximately $130 billion on a pro forma basis, including $25 billion of net debt, giving effect to Qualcomm's pending acquisition of NXP on its currently disclosed terms," Broadcom says.
Broadcom says that buying Qualcomm -- and in particular, acquiring the chip giant's cellular business -- would be "highly complementary to Broadcom's portfolio" and create a strong, global company able to offer a range of different semiconductor and communications solutions.
In addition, Broadcom says that due to Qualcomm's customer portfolio and international reach, a combined company would be able to "accelerate innovation and deliver more advanced semiconductor solutions to its broad global customer base."
Under the terms of the potential buyout, Qualcomm employees will be integrated into Broadcom.
Broadcom also says there are "compelling financial benefits" of a deal, predicted to reach pro forma revenues in the 2017 financial year of approximately $51 billion and pro forma 2017 EBITDA of approximately $23 billion, including synergies.
There are no expected financial conditions connected to the potential acquisition. According to Broadcom, Bank of America Merrill Lynch, Citi, Deutsche Bank, J.P. Morgan, and Morgan Stanley have informed the firm that debt financing will be available to complete the buyout.
Silver Lake Partners has also committed to $5 billion convertible debt financing.
Featured
A potential deal would need to be accepted by Qualcomm's board, having already been unanimously approved by the Board of Directors of Broadcom.
However, should the acquisition be accepted, this would create a chip company likely to worry tech giants and rivals Intel and Samsung -- and it would also be the largest acquisition of its kind to date.
"Our proposal provides Qualcomm stockholders with a substantial and immediate premium in cash for their shares, as well as the opportunity to participate in the upside potential of the combined company," said Hock Tan, president and Broadcom CEO. "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," the executive added. "With greater scale and broader product diversification, the combined company will be positioned to deliver more advanced semiconductor solutions for our global customers and drive enhanced stockholder value."
In a formal letter to Qualcomm, Tan mentioned there had been prior discussions between the two companies, and told the chip maker's board that Broadcom "believes that such a combination will deliver substantial benefits to our respective stockholders, employees, customers and other stakeholders."
Tan added:
"Our proposal will enable Qualcomm stockholders to achieve both immediate cash value and the ability to participate in the future success of the combined enterprise, which will benefit from greater scale and broader product diversification.
The combination of our two companies and associated synergies will be accretive to Broadcom's earnings, which will directly benefit Qualcomm stockholders through their equity ownership in the combined company.
We and our advisors have conducted extensive analysis of the regulatory approvals that will be required in connection with the proposed transaction, and we are confident that the transaction will receive all necessary approvals in a timely manner.
We would not make this offer if we were not confident that our common global customers would embrace the proposed combination, and we do not anticipate any material antitrust or other regulatory issues that would extend the normal timetable for closing a transaction of this nature."
Broadcom expects a potential deal to take up to 12 months to settle, assuming regulatory approval.
In a press release, Qualcomm acknowledged the offer, saying that the board will consider "what is in the best interest of Qualcomm shareholders," but the company would not comment further.
Previous and related coverage
Broadcom, Brocade push back merger deadline
The companies have been tied up in regulatory review hurdles for nearly a year.
Broadcom takes over network equipment maker Brocade in $5.5 billion deal
Broadcom will acquire the firm's fiber technologies -- and debt to boot.
FTC to force Broadcom to build a firewall to complete $5.5 billion Brocade takeover
Concerns over Broadcom supplying silicon to both Brocade and Cisco will see the semiconductor maker firewall its business with Cisco.