Broadcom Targets Qualcomm in Largest-Ever Tech Deal

Broadcom Targets Qualcomm in Largest-Ever Tech Deal

By contrast, Broadcom, whose roots extend to a former a division of Hewlett-Packard, has grown by leaps and bounds. The company traces its leadership to Avago Technologies, which went public in 2009 after years of ownership by Silver Lake and KKR. Its chief executive, Hock Tan, spearheaded a series of ever-bigger deals, culminating two years ago with the $37 billion takeover of Broadcom.

After that deal, Avago took on Broadcom’s name — but hung on to its dreams of becoming even bigger.

Qualcomm, whose wireless chips and patents touch nearly every smartphone in the world, is Broadcom’s most formidable quarry yet.

Under the terms of the offer, Broadcom is offering $70 a share, representing a 28 percent premium to Qualcomm’s closing stock price on Thursday, the day before reports about the bid emerged. As part of the deal, Silver Lake, the investment firm that has backed Broadcom for 12 years, has agreed to provide $5 billion in convertible debt to help finance the proposed transaction.

Qualcomm is likely to quickly reject the bid, believing that it dramatically undervalues the company. It is trying to close its own big acquisition, the $38.5 billion takeover of NXP Semiconductor, a chip maker whose products are becoming important in the internet-of-things ecosystem. (A condition of Broadcom’s offer is that Qualcomm not raise its offer to NXP beyond its current level of $110 a share.)

In a statement on Monday, Qualcomm said only that it was reviewing the Broadcom proposal.

Shares in Qualcomm traded below Broadcom’s offer as of Monday morning, at $63.83, potentially reflecting skepticism from shareholders that the takeover bid will succeed. Shares in Broadcom were little changed.

Though Mr. Tan famously avoids the news media, he took a big step into prominence on Thursday when he appeared with President Trump at the White House to announce that Broadcom would move its legal base to the United States from Singapore. Some analysts have questioned whether that decision was meant to help win political support for a takeover of Qualcomm, which is expected to face tough antitrust scrutiny.

For Qualcomm and its advisers, the biggest issue is likely to be a simple matter of price. Though the company last traded above $70 a share two years ago, its management team believes that the chip maker is poised for a rebound, thanks in part to the NXP acquisition and to a belief that it can prevail in its fight with Apple.

More fundamentally, the company believes that its trove of patents — among the most formidable in the world of wireless networking — remains a hugely valuable asset. And it is betting that it will be able to help define the forthcoming 5G standard for superfast networking.

But investors were unnerved by a report in The Wall Street Journal, citing people familiar with the matter, that Apple was weighing excluding Qualcomm’s chips from next year’s batch of iPhones, relying instead on competing products from the likes of Intel.

Broadcom is being advised by Moelis & Company, Citigroup, Deutsche Bank, JPMorgan Chase, Bank of America Merrill Lynch, Morgan Stanley and the law firms Wachtell, Lipton, Rosen & Katz and Latham & Watkins. Qualcomm is being advised by Goldman Sachs, Evercore Partners and the law firm Paul, Weiss.

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