The $130bn offer would create a dominant mobile chip player, but some say it’s an opportunistic move taking advantage of Qualcomm’s legal woes
Mobile chipmaker Broadcom has confirmed an unsolicited offer of $130 billion (£99bn) to acquire San Diego, California-based rival Qualcomm, in what would be the biggest tech merger to date and one of the largest acquisitions in history.
The proposed deal is twice as large as last year’s $65 billion EMC takeover by Dell and would create a single dominant player in chips for mobile devices such as smartphones and tablets.
But Qualcomm is preparing to reject the offer, according to some reports, considering it an opportunistic bid that takes advantage of legal troubles that have weighed on the company’s share price this year.
The deal could also be a difficult sell to regulators, particularly in China, where Qualcomm has faced antitrust scrunity in the past, including paying a fine of $975m in 2015 to end a probe into anti-competitive practices.
Qualcomm is likely to reject the offer, the Financial Times reported, citing unnamed sources.
Broadcom chief executive Hock Tan is considered a formidable dealmaker, however, with his company and Qualcomm two of the main players in a round of consolidation that has seen about $400bn worth of deals announced in the last four years alone, according to a Bloomberg estimate.
Those deals include the creation of the current Broadcom out of the $37bn merger of Avago Technologies and Broadcom Corp. last year and Qualcomm’s proposed acquisition of NXP Semiconductors for more than $40bn.
Broadcom, which is split between Singapore and the US, offered cash, shares and debt worth $70 per share, a 28 percent premium on Qualcomm’s current share price – but barely above its trading price a year ago.
In January of this year, Apple launched a $1bn lawsuit against Qualcomm for allegedly overchanging, accompanied a week earlier by a US regulatory probe also over excessive royalties for technologies essential to industry standards.
The ensuing legal tangles have seen Qualcomm’s share price drop by 20 percent this year.
Responding to concerns over lengthy regulatory scrutiny of the deal, Broadcom said competition issues would be “met in a timely manner”.
The company has a better relationship with Apple than Qualcomm and also said it was confident the deal would be welcomed by China, which is in the midst of a strategic drive to build up its own semiconductor industry.
“We expect China, as with other countries, will welcome this deal as a solution to the double-dipping issue, and will find there are no significant issues beyond this,” Broadcom said in a statement, referring to Qualcomm’s earlier probe over patent double-charging.
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