Conquering Those Qualms: Broadcom Makes Bid For Qualcomm

Andrew Cummings
November 8, 2017

It says that Qualcomm is not that likely to accept this first offer from Broadcom.

According to a source speaking with the Financial Times newspaper, Qualcomm will reject the bid due to the regulatory risks involved.

While Qualcomm shareholders wait for a higher bid (it's now $60/share in cash and $10/share in Broadcom stock), Broadcom is reportedly willing to push a proxy battle if its offer is spurned, Bloomberg reports. When it comes to the companies' sector competitors, they are probably hoping this deal completely falls apart. This also indicates that Qualcomm is perhaps confident in its chances at court against Apple, which will lead to the company bouncing back.

On Monday, Broadcom Ltd (NASDAQ:AVGO) announced an unsolicited bid for QUALCOMM, Inc.

"We believe the combination could create shareholder value through potential accretion, synergies, increased share with Apple and Samsung; in addition, Broadcom could potentially settle the licensing dispute with Apple in a more-timely manner than could Qualcomm, given Broadcom's strong relationship with Apple", Canaccord Genuity analysts wrote in a note to clients. Qualcomm itself is in talks to take over NXP Semiconductors.

Speaking of the offer, Broadcom's president and CEO, Hock Tan stated that the transaction would "position" the combined company as a "global communications leader". The stock soared Friday, closing at $61.81 after The Wall Street Journal reported that Broadcom was considering a bid.

And SunTrust's William Stein compared Broadcom's M&A moves to "a game of chess", and raised his price target from $281 a share to $325 a share. Qualcomm's shares are down over 3%, even after posting large advances on the speculation, and eventual reality of the takeover offer. The argument might be that Qualcomm shares are now undervalued, due in part to the nasty legal battle with Apple. China's ministry of commerce requires all deals involving parties to apply for Chinese merger approval if the combined global turnover of the company is exceeding $1.5 billion or combined China income exceeding $300m - an unusually low filing threshold.

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