Qualcomm Shares Sink after Broadcom Raised its Bid to $121bn

Qualcomm Inc shares sank more than 6% after Broadcom Ltd raised its bid by 24% to more than $121 billion to buy Qualcomm, putting more pressure on its rival chipmaker to negotiate.

Qualcomm shares fell 6.57% to finish at $61.73 in New York, while Broadcom shares dropped 3.13% to close at $228.10.

The new offer was a premium of 24% to $121 billion in a cash and stock offer. The offer would value Qualcomm at $82 per share, which was 17% higher than an opening proposal in November that was rejected. It’s the “best and final” proposal, according to Broadcom.

“Any rational board would engage with us,” Broadcom Chief Executive Officer Hock Tan said in an interview. “It’s an offer that provides more value to the shareholders of Qualcomm than any standalone value that Qualcomm has tried, or may think they can try to create.”

Additionally, the new offer included $60 in cash and $22 in Broadcom stock. Its first offer of $70 per share in November was $60 in cash and $10 in stock and valued the company at $103 billion. The increased stock component would subject the deal to a Broadcom shareholder vote.

“Qualcomm and its board now have a tough decision as this is a compelling offer in our opinion,” said Daniel Ives, analyst at GBH Insights. “We believe Broadcom is serious and aggressive around acquiring Qualcomm and this higher bid reflects that.”

Broadcom said that it was willing to increase the cash part of the deal if the transaction is not completed within a year after any definitive agreement. If regulators reject the deal, Broadcom would pay Qualcomm a “reverse termination fee” of up to $10 billion, according to sources.

“We continue to hope you choose to engage with us for the benefit of your stockholders,” Tan said. “However, we will withdraw this proposal and cease our pursuit of Qualcomm immediately following your upcoming annual meeting unless we have entered into a definitive agreement or the Broadcom-nominated slate is elected.”

Meanwhile, Qualcomm was in the process of potentially acquiring NXP Semiconductors NV at $110 per share, or $38 billion. However, the new offer by Broadcom has put the company to either buy NXP or terminate the $38 billion deal.

NXP shareholders thought otherwise about the acquisition, saying it undervalued the company and had sought a price as high as $135.

Furthermore, Qualcomm confirmed that it had received the higher offer but said it would not comment until it had reviewed the materials with its advisors.

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