SAN FRANCISCO — Broadcom Ltd. launched an unsolicited takeover bid to acquire larger rival Qualcomm for roughly $103 billion in what would be the largest tech acquisition ever.
Broadcom said it would offer $70 per share to acquire Qualcomm, the largest maker of mobile phone chips, a 28 percent premium over Qualcomm's closing stock price on Nov. 2, the day before reports that Broadcom was planning a takeover offer surfaced. Broadcom did not approach Qualcomm to discuss the deal prior to launching the bid, according to reports.
The magnitude of the deal would be difficult to overstate, even in a period of unprecedented consolidation for the semiconductor industry. Qualcomm itself is still in the process of trying to close a deal for European chip maker NXP Semiconductors — first announced a year ago — which is to date the largest announced semiconductor firm acquisition.
A combined Qualcomm, NXP and Broadcom could have total semiconductor sales of $40 billion, making it the third largest chip company ahead of TSMC but below Samsung and Intel, according to Rob Lineback of market watcher IC Insights. Such a deal would make 2017 the largest on record in semiconductor mergers with an estimated value of $120 billion including a reported merger proposal between Cavium and Marvell, he added.
"This complementary transaction will position the combined company as a global communications leader with an impressive portfolio of technologies and products," said Hock Tan, Broadcom's president and CEO, in a press statement.
Qualcomm said its board of directors would assess the proposal in consultation with financial and legal advisors. The company said it would not comment further on the proposal until the board completed its review.
Analysts reached by EE Times expressed some doubts that an acquisition of Qualcomm by Broadcom makes sense or would pass the muster with regulators.
"While it's feasible, it would not be possible at this time with the NXP deal under review," said Jim McGregor, principal analyst at Tirias Research. "I also have serious doubts about it, and it would face regulatory scrutiny."
Regulators around the world would closely scrutinize several product areas including Wi-Fi, Bluetooth, and other RF chips, as well as some embedded processing segments if the Qualcomm acquisition includes NXP, said Lineback.
Thomas Krause, Broadcom's chief financial officer, said that given the "complementary nature" of the firms' products "we are confident that any regulatory requirements necessary to complete a combination with Qualcomm will be met in a timely manner."
Handel Jones, CEO of International Business Strategies Inc. (IBS), a Los Gatos, Calif.-based consulting firm, said NXP might be what Broadcom is most interested in. "There would be good synergy between Broadcom and NXP," he said.
NEXT PAGE: Aggessive in Acquisitions
Broadcom has completed five major acquisitions since 2013. Tan has been aggressive in pursuing major acquisitions, even of larger companies. Case in point: Broadcom Ltd. was formed by the 2016 acquisition of Broadcom Corp. by the smaller Avago Technologies for $37 billion. Tan was CEO of Avago and engineered the deal.
Under the proposal, shareholders would receive $60 cash and $10 worth of Broadcom stock for every share of Qualcomm. According to Broadcom, the total value of the offer is $130 billion including debt.,
"We would not make this offer if we were not confident that our common global customers would embrace the proposed combination," Tan said Monday. "With greater scale and broader product diversification, the combined company will be positioned to deliver more advanced semiconductor solutions for our global customers and drive enhanced stockholder value."
Broadcom announced Thursday (Nov. 2) it would relocate its main headquarters to the U.S. from Singapore, a move hailed by the Trump Administration as a testament to the power of a corporate tax reform proposal currently being pushed by Republican lawmakers.
The Wall Street Journal reported Friday that Marvell Technology is in talks to acquire another communications chip vendor — Cavium Technologies — in a move that would create a company with a combined valuation of about $14.5 billion.
Rick Merritt contributed to this story from Silicon Valley.
— Dylan McGrath is the editor-in-chief of EE Times.