Transactions

Broadcom Makes $130B Play for Qualcomm

Cash and stock proposal represents hefty premium on Qualcomm shares 11/06/2017 9:19 AM Eastern

Broadcom’s desire to acquire Qualcomm became official Monday, as it made an unsolicited bid to acquire its chip-making rival in a deal valued at $130 billion, or $70 per share in cash and stock and $25 billion of net debt.

Broadcom said its offer consists of $60 in cash and $10 per share in Broadcom shares, noting that it represents a 28% premium over the closing price of Qualcomm common stock on November 2, the day before reports surfaced that a proposal was in the works. It also represents a 33% premium on Qualcomm’s unaffected 30-day volume-weighted average price.

RELATED: Broadcom, Qualcomm Shares Rise on M&A Chatter

Broadcom noted that it offer stands whether Qualcomm consummates its pending acquisition of NXP Semiconductor.

If the Broadcom-Qualcomm deal comes to fruition, Broadcom said the combo will represent pro forma fiscal 2017 revenues of about $51 billion and EBITDA of roughly $23 billion.

The official proposal comes the week after Broadcom announced it was moving its headquarters back to the U.S. (from Singapore), a decision that drew praise from President Donald Trump.

RELATED: Broadcom Moving Back Stateside

Though the deal would combine two major chip companies, Broadcom, a key supplier of set-top box and DOCSIS modem silicon, claimed that Qualcomm’s big focus on cellular technology would make it a complementary marriage and accelerate the pace of innovation.

"This complementary transaction will position the combined company as a global communications leader with an impressive portfolio of technologies and products,” Hock Tan, Broadcom’s president and CEO, said in a statement. “We would not make this offer if we were not confident that our common global customers would embrace the proposed combination. 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."

“Given the complementary nature of our products, we are confident that any regulatory requirements necessary to complete a combination with Qualcomm will be met in a timely manner,” added Broadcom CFO Thomas Krause.  “We look forward to engaging immediately in discussions with Qualcomm so that we can sign a definitive agreement and complete this transaction expeditiously."

Qualcomm confirmed that it has received the unsolicited proposal from Broadcom, and that its board and advisors will assess in before deciding a course of action.

Broadcom said BofA Merrill Lynch, Citi, Deutsche Bank, J.P. Morgan and Morgan Stanley have advised Broadcom in writing that they are highly confident that they will be able to arrange the necessary debt financing for the proposed transaction. 

Additionally, Silver Lake Partners, a strategic partner to Broadcom in prior transactions, has provided Broadcom with a commitment letter for a $5 billion convertible debt financing in connection with the transaction.

In a letter to Qualcomm shareholders, Broadcom said it was likewise confident that the proposed deal “will receive all necessary approvals in a timely manner.”

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