Broadcom offers $105 billion for Qualcomm in landmark deal

[SAN FRANCISCO] Broadcom Ltd offered about US$105 billion for Qualcomm Inc, kicking off an ambitious attempt at the largest technology takeover ever in a deal that would rock the electronics industry.

Broadcom made an offer of US$70 a share in cash and stock for Qualcomm, a 28 per cent premium for the world's largest maker of mobile phone chips as of the stock's closing price on Nov 2, before Bloomberg first reported talks of a deal. The proposed transaction is valued at approximately US$130 billion on a pro forma basis, including US$25 billion of net debt.

Buying Qualcomm would make Broadcom the third-largest chipmaker, behind Intel Corp and Samsung Electronics Co. The combined business would instantly become the default provider of a set of components needed to build each of the more than a billion smartphones sold every year. The deal would dwarf Dell Inc's US$67 billion acquisition of EMC in 2015 - then the biggest in the technology industry.

"This complementary transaction will position the combined company as a global communications leader with an impressive portfolio of technologies and products," Hock Tan, resident and chief executive officer of Broadcom, said in a statement Monday. "We would not make this offer if we were not confident that our common global customers would embrace the proposed combination.'' Mr Tan is making a play for Qualcomm as the once-unstoppable chipmaker limps through a rare moment of weakness. Qualcomm's most profitable unit, which licenses mobile phone technology, is under assault from regulatory actions around the world and a legal challenge from Apple Inc. The lawsuit may prompt Apple to stop buying Qualcomm chips for use in the iPhone and other products, which would deal a major blow to a unit that drives the bulk of Qualcomm's revenue. Meanwhile, Broadcom counts Apple among its largest customers.

Qualcomm shares rose 3.6 percent in premarket trading Monday in New York. The stock closed up 13 perent on Friday at US$61.84, valuing the company at US$91 billion. Broadcom rose 5.5 per cent Friday for a market value of US$112 billion. Its shares gained 1.2 per cent early Monday.

"The deal makes a lot of sense," Romit Shah, an analyst at Instinet, said on Bloomberg Television. "Broadcom would be getting US$30 billion in revenue, and it would be very strategic. Both companies have a significant presence in smartphones." Broadcom's Tan has played a pivotal role in a wave of consolidation engulfing the US$300 billion semiconductor industry over the last three years. He took a former Hewlett-Packard division and built it into one of the largest chipmakers through a string of purchases. Mr Tan established the current iteration of Broadcom in 2016 when his Singaporean company Avago Technologies Ltd. acquired US-based Broadcom Corp for US$37 billion.

BLOOMBERG