Broadcom plans to raise its takeover offer for fellow American semiconductor Qualcomm, Reuters quotes sources familiar with the matter as saying.
The offer of approximately 120 billion US dollars is aimed at ratcheting up the pressure on the reluctant suitor to start negotiations.
Broadcom was scheduled to meet with its advisers this week to finalize an offer that values Qualcomm between 80 US dollars and 82 US dollars per share, two of the sources said.
Broadcom’s previous 70 US dollars per share offer consisted of 60 US dollars per share in cash and 10 US dollars per share in stock.
The move to raise the bid price comes ahead of a Qualcomm shareholder meeting scheduled for March 6, when Broadcom is seeking to replace Qualcomm’s board of directors by nominating its own slate for election.
A sign to the campus offices of chip maker Broadcom. /Reuters Photo
A sign to the campus offices of chip maker Broadcom. /Reuters Photo
Broadcom also plans to offer Qualcomm a higher-than-usual breakup fee in the event regulators thwart the deal, according to the sources. Typically, such breakup fees equate to about three percent to four percent of a deal’s size.
The sources cautioned that Broadcom chief executive officer Hock Tan may decide to significantly change the terms at the last minute.
The sources asked not to be identified because the deliberations are confidential. Broadcom and Qualcomm did not immediately respond to requests for comment.
Broadcom has said it is very confident a deal can be completed within 12 months of signing an agreement. Qualcomm counters that the regulatory review processes required around the world would take more than 18 months and be fraught with risks.
Qualcomm provides chips to mobile carrier networks to deliver broadband and data, making it an attractive acquisition target for Broadcom, which hopes to expand its offerings in so-called 5G wireless technology.
Qualcomm has argued to its shareholders that Broadcom’s hostile bid is aimed at acquiring the company on the cheap.
Qualcomm reported quarterly profit and revenues last week that beat analysts’ expectations as demand surged for its chips used in smartphones and cars. However, its forecast was below estimates due to tepid mobile phone sales in China.
Qualcomm is engaged in a patent infringement dispute with Apple. Qualcomm has said the litigation is necessary in order to defend is licensing programs.
Qualcomm is also trying to clinch an acquisition of its own, proposing to buy NXP Semiconductors NV for 38 billion US dollars. The deal was approved by European Union antitrust regulators last month, and only China has yet to approve it. Qualcomm expects the government’s blessing later this month.
The NXP deal still faces an uncertain future as some of its shareholders, including activist hedge fund Elliott Management, have asked Qualcomm to raise its offer. Qualcomm is expected to make a decision later this month.
Source(s): Reuters