Broadcom offers to buy Qualcomm for $130B

Broadcom bids $130 Billion to acquire Qualcomm

The bid for Qualcomm is an ambitious move by Broadcom Chief Executive Hock Tan, who turned a small, scrappy chipmaker into a $100-billion company based in Singapore and the United States. The proposed transaction is valued at approximately $130 billion on a pro forma basis, including $25 billion of net debt, giving effect to Qualcomm's pending acquisition of NXP on its now disclosed terms. We refer investors to our November 3 note, written after Bloomberg and The Wall Street Journal surfaced rumors about the potential bid, but in short, we see a sound strategic rationale for such a deal, and the financial component is especially attractive for Broadcom because we value Qualcomm at $68 per share on a stand-alone basis.

A Broadcom-Qualcomm deal would create a dominant company in the market for supplying chips used in the 1.5 billion or so smartphones expected to be sold around the world this year.

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

Shares of Qualcomm, whose chips allow phones to connect to wireless data networks, traded above $70 as recently as December 2016 and topped $80 in 2014. There has been regulatory scrutiny for that deal in Europe, as well as reported objections from NXP stakeholders.

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Broadcom's bid comes as regulators continue to review Qualcomm's proposed acquisition of NXP Semiconductors for $38 billion (£29 billion). Broadcom primarily focusses on Wi-Fi and Bluetooth chips.

Qualcomm said in a statement Monday morning that it had received the offer and its board of directors would be reviewing it. We think NXP would also fit in reasonably well under the Broadcom umbrella, but we're surprised that Qualcomm's cash hoard isn't a requirement to fund Broadcom's bid.

The company has also got commitment letter for $5 billion debt financing from private equity Silver Lake Partners.

If Broadcom decides to make a hostile bid, Qualcomm's governance rules would allow the rival to submit its own slate for the entire 10-member board by a Dec 7 nomination deadline.

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