Broadcom has slashed its offer to takeover Qualcomm to $117 billion.
The move follows Qualcomm’s decision to raise its own takeover deal for NXP Semiconductors to $44 billion. And – to nobody’s surprise – Qualcomm is pretty insulted by Broadcom’s decision to lower its latest bid by some 4 per cent.
Claiming that Broadcom had made ‘an inadequate offer even worse,” Qualcomm agreed to a showdown of boardroom members on March 6, when Qualcomm shareholders are scheduled to elect an 11-member board and decide whether to hand control to a slate of six nominees put forward by Broadcom.
In a statement, Qualcomm said: “Broadcom’s reduced proposal has made an inadequate offer even worse despite the clear increase in value to Qualcomm stockholders from providing certainty around the NXP acquisition. Broadcom has refused and continues to refuse to engage with Qualcomm on price.
“The acquisition of NXP Semiconductors will be 40 per cent accretive to our Non-GAAP results , enables us to accelerate our growth strategy, and provides stockholders greater certainty around Qualcomm’s fiscal 2019 Non-GAAP EPS commitment of $6.75-$7.50, which includes $1.50 per share of accretion from NXP. Broadcom is well aware there is no ‘reduction of value by $4.10 per share’ because the transaction could not be completed at $110.00 per share.
“The Qualcomm Board is committed to maximizing value for Qualcomm stockholders, whether that be through executing its growth strategy or selling the company. Broadcom’s revised $79.00 per share proposal materially undervalues Qualcomm, fails to take into account the strategic and financial benefits of acquiring NXP, and continues to face a long and highly uncertain path to regulatory approvals.”
The statement added that to the contrary, Qualcomm is ‘far more valuable’ with NXP than without it for the following reasons:
• NXP’s non-GAAP operating income has increased by 20 per cent – which means the $127.50 per share price is actually at a lower multiple than the original deal price
• NXP provides significant strategic benefits to Qualcomm including increased revenue diversification, substantial expansion of total available markets (TAM) and greater scale in higher growth end markets of Auto and IoT
• The strong market dynamics and positive outlook for key segments
• High confidence in annualized cost synergies of at least $500 million based on integration planning
However, Broadcom said that Qualcomm’s raised bid would amount to overpaying for NXP and cut its own bid as a result. “Qualcomm’s board acted against the best interests of its stockholders,” Broadcom said in its statement.