Broadcom makes offer to acquire Qualcomm in record $105bn deal

Chipmaker Broadcom seeks to acquire Qualcomm

Broadcom today (6 November) revealed a $105bn takeover bid for Qualcomm, a move that would see the creation of a giant in the chip-making world.

GBH Insight analyst Daniel Ives said bullish investors were hoping for $75 to $80 per share.

"Our proposal provides Qualcomm stockholders with a substantial and immediate premium in cash for their shares, as well as the opportunity to participate in the upside potential of the combined company", said Hock Tan, president and chief executive officer of Broadcom.

Shares of Qualcomm rose about 1 percent in early trading.

Qualcomm said it would review the proposal.

Any deal struck between the two companies would face intense regulatory scrutiny, especially in China, which is home to expanding rivals.

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Herbert Hovenkamp, who teaches antitrust at the University of Pennsylvania Law School, said that United States regulators would try to ensure the deal would not lead to higher chip prices.

Broadcom's bid comes as regulators continue to review Qualcomm's proposed acquisition of NXP Semiconductors for $38 billion (£29 billion). It has pulled off a string of purchases over a decade.

Broadcom's own $5.5 billion (£4.2 billion) agreement to merge with US network provider Brocade Communications Systems past year has been delayed while it is scrutinised by the US Committee on Foreign Investment (CFI), which investigates proposed acquisitions of US companies by foreign buyers on national security and intellectual property grounds. We will maintain our fair value estimates of $68 for narrow-moat Qualcomm and $203 for narrow-moat Broadcom, but we would probably raise our fair value estimate for Broadcom-perhaps as much as 25%-if a definitive deal were reached.

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

Industry analysts believe that if Apple does not challenge the deal, it's one hurdle that Broadcom will have cleared.

Its entire 10-member board is up for re-election this spring, and Broadcom could seize on the December nomination deadline to put forward its own slate that would then help make negotiations.

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