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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.

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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.