Published: Tue, November 07, 2017
Industry | By Faith Ward

Broadcom offers to buy Qualcomm for $130B

Broadcom offers to buy Qualcomm for $130B

The move would combine two of the largest makers of wireless communications chips for mobile phones and could pose a significant competitive threat to Intel, which has been looking to diversify into smartphone technology. According to CNBC, Broadcom brought the offer to Qualcomm privately more than a year ago but was rebuffed.

"It's a smart move that would make Broadcom into a tech juggernaut", said GBH Insights analyst Daniel Ives.

Broadcom and Qualcomm are no strangers to acquisitions, with the pair in talks to complete multibillion-dollar deals. CEO Hock Tan last week, saying the company is likely to relocate its headquarters from Singapore to the United States.

Broadcom Ltd., which has corporate headquarters are in San Jose, California but a home address in Singapore, is now taking steps that should make it easier to get deals done.

"The combined company will be positioned to deliver more advanced semiconductor solutions for our global customers and drive enhanced stockholder value", he added.

The proposal comes as Qualcomm is trying to close its pending $38-billion acquisition of NXP Semiconductors NV (NXPI.O).

Antitrust officials, who also would have to approve a Broadcom-Qualcomm deal, are still considering Qualcomm's purchase of NXP. Analysts say that dispute has weighed on Qualcomm's stock price.

Qualcomm, known to consumers as the maker of Snapdragon chips found in smartphones and tablets, is already the No. 3 chip supplier, according to research firm Gartner, trailing Intel and Samsung. Broadcom is also a major supplier to numerous same companies for Wi-Fi chips.

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Broadcom shares gained about 1.2 percent hike early Monday morning.

Qualcomm has a (long) pending acquisition, of chipmaker NXP Semiconductors NV, in the works - and Broadcom notes that its offer is not dependent on whether or not Qualcomm manages to close with NXP on the now disclosed terms (it's offering ~$39BN for the Netherlands-based chipmaker which has a focus on car-related applications and also security-based identification).

Qualcomm's share price closed at $61.81 on Friday. Shares of NXP fell 2 percent and Brocade slipped 2.6 percent.

Qualcomm's share price rose as much as 14 per cent when the news broke. Qualcomm's recent forward PE of 15.4 was well below its 25.9 average. The bid follows a series of deals in the components market. While it did not specify particular companies, Qualcomm and Apple have been in a long-running legal battle over licensing fees owed to Qualcomm.

Qualcomm sells chips but also licenses a patent portfolio of related technologies. A combination with Broadcom would not change that.

Broadcom said if the deal is approved, it expected a combined company to have revenues of about $51 billion. Broadcom primarily focusses on Wi-Fi and Bluetooth chips.

Broadcom may be able to skip review by regulators concerned about foreign ownership of USA assets, since it is moving its headquarters to California. The deal has been delayed as it's scrutinized by the Committee on Foreign Investment in the United States, which investigates proposed acquisitions of USA companies by foreign buyers on national security and intellectual property grounds.

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