In a move that is being called the biggest tech deal ever (surpassing Dell's $67 billion acquisition of EMC,) Broadcom is reportedly making a $105 billion unsolicited offer for Qualcomm. Noted by Bloomberg, Broadcom's offer for Qualcomm totals to $70 a share in stocks and cash and is coming at a 28% premium over the closing price of Qualcomm stock on November 2nd. The offer also stands regardless of the outcome of Qualcomm's ongoing acquisition of NXP Semiconductors.
If successful, this deal would bring Broadcom up to standards with Intel and Samsung, making it the third largest maker of electronic chipsets. Qualcomm, though, is apparently planning to back off the offer, with internal sources saying that the offer is a cheap move that undermines the value of the company. In a statement, Qualcomm instead insists that they will "assess [the] proposal in order to pursue the course of action that is in the best interests of Qualcomm shareholders."
On the other hand, Broadcom has high hopes for the offer, mentioning that the proposal will provide Qualcomm stockholders with premium in cash for their shares. In the words of Hock Tan, President and Chief Executive Officer of Broadcom.
"This complementary transaction will position the combined company as a global communications leader with an impressive portfolio of technologies and products. 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 valuee."
There are three specific financial benefits of the proposal, which Broadcom highlights in a press release.
- Qualcomm's cellular business is highly complementary to Broadcom's portfolio, and the combination will create a strong, global company with an impressive portfolio of technologies and products.
- As a result of enhanced scale, reach and financial flexibility, the combined company will benefit from the ability to accelerate innovation and deliver more advanced semiconductor solutions to its broad global customer base.
- The combined company will have an enhanced financial profile, benefiting from Broadcom's proven operating model with industry-leading margins. The combined Broadcom and Qualcomm, including NXP, will have pro forma fiscal 2017 revenues of approximately $51 billion and pro forma 2017 EBITDA of approximately $23 billion, including synergies. The transaction is expected to be accretive to Broadcom's Non-GAAP EPS in the first full year after close.
As things play out, it will be interesting to see if the deal affects Qualcomm's ongoing dispute with Apple. It also will be interesting to see if there is any impact on Qualcomm's ongoing plans to work with Microsoft to bring Windows 10 to ARM PCs.