Broadcom – on Monday – made a final offer of $121 billion for acquiring Qualcomm touting it as the “best and final offer.” Responding to the offer, Qualcomm said its board of directors would review the offer, according to Reuters.
Under the new proposal, Broadcom is offering $82 per share, including $60 in cash and $22 in Broadcom stock. The previous offer in November was $70 per share – comprised of $60 in cash and $10 in stock. Broadcom would need the shareholders’ approval to go through with the deal.
“For Qualcomm, while the price is higher, the ‘best and final’ nature of the deal may be viewed as increasing the chance Broadcom could walk,” said Sanford C. Bernstein & Co. analyst Stacy Rasgon, according to Bloomberg. Regan thinks that Qualcomm is not happy with what is being offered and considers the $82 bid as undervaluing them.
After Broadcom revised the deal, Qualcomm’s stock took a dip hinting that the shareholders are not happy and are expecting more. Qualcomm has been trying to push away the acquisition. Qualcomm believes that it can do much better as a standalone company. Further, the company is also planning to enter new product markets soon.
Broadcom – will it benefit from the deal?
Broadcom is confident that the deal would be concluded within twelve months of a definitive agreement. Qualcomm, however, says that regulatory review processes across the globe would take time because several countries will weigh in on the impact of such a deal where the companies have their operations, notes a separate Reuters report. Last month, the United States Federal Trade Commission (FTC) made a second request for information on Broadcom’s bid.
The deal, if it goes through, would put Broadcom at third place among the global chipmaking companies only behind Intel and Samsung. The new company will become the default supplier of certain components required to build over one billion smartphones a year. This deal would be bigger than Dell’s $67 billion purchase of EMC in 2015, which was considered the biggest tech deal at that time, notes MacRumors.
However, a recent report by Nomura analyst Romit Shah makes the deal somewhat unattractive. In a note, Shah says that Apple is looking to drop chips from Qualcomm and Broadcom for its upcoming line of smartphones. Further, the analyst said that though Qualcomm offers solid technology, Intel’s modem costs less and yet meets Apple’s standard, according to Fortune.
What about NXP deal?
The new offer from Broadcom also puts pressure on Qualcomm to either buy NXP Semiconductors at $110 per share or terminate the $38 billion deal. NXP shareholders believe that Qualcomm has undervalued the company, and hence, are demanding an increased price per share at $135.
In a note, Christopher Rolland, an analyst at Susquehanna International Group, said that Broadcom might have handed Qualcomm a “Poison Pill,” according to Bloomberg. Rolland thinks that Qualcomm’s board of directors “can hinder the potential of a takeout by raising the bid for NXP, closer to the $135 value that NXP activists have been pushing for.”