Broadcom Lowers Offer for Qualcomm, Citing 'Value Transfer' --2nd Update
February 21 2018 - 1:08PM
Dow Jones News
By Ted Greenwald and Austen Hufford
Broadcom Ltd. knocked more than $4 billion off its bid to
acquire Qualcomm Inc., firing back a day after Qualcomm sweetened
its own offer to acquire NXP Semiconductors NV by billions of
dollars -- a move Broadcom staunchly opposed.
The lowered bid Wednesday is the latest turn in a monthslong
dance between three global giants of the chip industry. On Tuesday,
Qualcomm lifted its offer for NXP to $127.50 a share, or about $44
billion, from its earlier $39 billion bid and said it had won
support from key stakeholders including Elliott Management
Corp.
Broadcom had long opposed an offer for NXP beyond the original
$110 a share, suggesting such a move could cause it to abandon its
pursuit of Qualcomm in what would be the largest-ever tech merger.
Broadcom Chief Executive Hock Tan recently softened that position,
saying he would keep his options open.
One of those options took shape Wednesday. Broadcom slashed its
offer for Qualcomm to $79 a share from $82, lowering the cash
portion by $3 to $57, and accused Qualcomm of simply transferring
value to NXP shareholders.
The new offer for Qualcomm came in at about $117 billion, down
from the more-than $121 billion that had been on the table -- a
price Broadcom had described as its "best and final" offer when it
elevated it from $105 billion in December. On Wednesday, Broadcom
said that $121 billion offer would stand should Qualcomm not close
the deal with NXP.
Prior to reducing his bid Wednesday, Mr. Tan had said his offer
stood whether the NXP deal got done at $110 a share, or the deal
didn't happen. He told The Wall Street Journal in December he
valued the cash Qualcomm would spend on NXP equally to the company
itself.
Broadcom protested that the higher bid from Qualcomm transferred
$4.10 a share in value to NXP shareholders. In its newly lowered
bid, Broadcom cut the per-share price by only $3 share. That
difference could be seen as a way to compensate Qualcomm
shareholders given the reduction came from the cash portion of the
bid, said Mike Walkley, an analyst with Canaccord Genuity Group
Inc.
Qualcomm didn't respond to a request for comment.
In morning trading in New York, shares in Broadcom rose a hair
to $250, while Qualcomm shares fell 1.2% to $63.24. NXP shares were
up slightly at $125.90.
The two companies are headed toward a showdown March 6 at
Qualcomm's annual meeting, where shareholders will have a chance to
vote on six candidates proposed by Broadcom, a number that would
give them majority control of the board.
Wednesday's move makes sense as a way to stir opposition by
Qualcomm shareholders to the NXP deal, said Marcel Kahan, a law
professor who specializes in mergers and acquisitions at New York
University. One strategy, he said, is Broadcom could raise its bid
later, giving Qualcomm directors a reason to accept a deal if it
seems they are losing control of the board.
Qualcomm and Broadcom have different views about NXP, a Dutch
chip specialist. Qualcomm is looking to NXP to broaden its reach
beyond its stronghold in smartphones to automobiles, security and
internet-connected devices -- fast-growing markets Qualcomm thinks
can provide a rich payoff for its investments in fifth-generation
cellular technology, known as 5G.
Mr. Tan believes NXP has a limited number of products that fit
his strict criteria for acquisition: market and technology leaders
that appeal to his existing customer base. He had agreed with the
initial assessment by Qualcomm and NXP management that a
$110-a-share price was fair.
While it is unusual for a prospective acquirer to lower its
offer, it isn't unheard of, Mr. Kahan said. For example, MacAndrews
& Forbes Holdings Inc. in the late 1980s reduced its offer
price for Revlon Group after the cosmetics company repurchased
shares at a premium, he said. MacAndrews ended up raising its bid
and ultimately prevailed, he said.
Write to Ted Greenwald at Ted.Greenwald@wsj.com and Austen
Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
February 21, 2018 12:53 ET (17:53 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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