Broadcom makes offer to acquire Qualcomm in record $105bn deal

Tammy Harvey
November 7, 2017

"Chipmaker Broadcom officially unveiled a $130bn offer, including net debt, for Qualcomm on Monday, in what could be the largest tech deal in history".

"There is a long road here, while Broadcom is one of the most disciplined acquirers, we think in an unsolicited offer - rarely is the 1st offer the last one, suggesting there is an upside bias to Broadcom's math. Net/Net: We think this deal fits Broadcom's strategy and could be a material catalyst to enable earnings per share and free cash flow upside".

Both companies now supply Apple with wireless chips and patent licenses, and the deal would make Broadcom the world's third-largest chipmaker after Intel and Samsung.

"We believe a Qualcomm acquisition could potentially entail Broadcom retaining the $6 billion - 95 percent licensing cash cow and, depending on the leverage, keep [chips] or sell it to another chip OEM".

Perhaps the most important new news on the bid is that Qualcomm is expected to reject this deal as it undervalues the company. Broadcom has said, however, that its offer stands irrespective of whether the NXP deal goes through or not.

The proposed deal would see Broadcom paying a 28% premium on shares for its rival but is reliant on Qualcomm completing its $38 billion takeover of NXP, which has yet to close.

According to sources Qualcomm is not aware of the details of Broadcom's bid and the company has yet to make any comment.

"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".

In a statement about its proposal, Broadcom president and CEO Hock Tan flagged "greater scale and broader product diversification" as key strategic drivers for the offer.

The bid comes as Broadcom plans to move its headquarters to the United States from Singapore.

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