In November of last year, Qualcomm rejected Broadcom’s $70 per share cash-and-stock bid that valued the company at around $103 billion. Qualcomm then said Broadcom’s offer significantly undervalued the company.
Broadcom has since been making bids to buy Qualcomm. On Monday, Broadcom raised the bid to over $121 billion, imputing a value of close to $82 a share. In the new offer, Broadcom has kept the cash part of the deal at $60 per share — the same as its previous offer — but increased the stock part to $22 worth of Broadcom’s shares from $10. The company said this was its “best and final offer” to Qualcomm.
Qualcomm said it would review the revised proposal and make no further comment on the proposal until its board completed its review. If accepted, this would become the largest tech deal ever.
Broadcom’s Chief Executive Officer Hock Tan is on a mission to build a behemoth chip company in order to gain major market share and lock in billions of dollars being spent by telecom companies to build the 5G network.
“Qualcomm and its board now have a tough decision as this is a compelling offer in our opinion,” said analyst Daniel Ives of GBH Insights.
Broadcom said it was willing to increase the cash part of the deal if the transaction is not completed within a year after any definitive agreement, and would pay Qualcomm a significant “reverse termination fee” if regulators scuttle the deal.
“For Qualcomm, while the price is higher, the ‘best and final’ nature of the deal may be viewed as increasing the chance Broadcom could walk,” said Sanford C. Bernstein & Co. analyst Stacy Rasgon in a research note. “We suspect the price is still below what Qualcomm is looking for; at a minimum by the metrics they outlined a few weeks ago they would likely still consider an $82 bid as undervaluing them.”
This proposal “includes substantially more Broadcom stock, which will allow Qualcomm stockholders a greater opportunity to participate in the upside created by the combined company’s strategic and operational advantages,” Broadcom CEO Hock Tan said in a letter sent to Qualcomm, which was made public.