Broadcom Reacts by Cutting Qualcomm Bid -- WSJ
February 22 2018 - 3:02AM
Dow Jones News
By Ted Greenwald and Austen Hufford
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (February 22, 2018).
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, up from $39 billion, and said it had won support from key
stakeholders including Elliott Management Corp.
Broadcom had 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 by lowering the cash
portion by $3 to $57, and accused Qualcomm of simply transferring
value to NXP shareholders.
The new offer for Qualcomm amounts to 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 fail to
close the deal with NXP.
Prior to reducing his bid Wednesday, Mr. Tan had said his offer
stood whether the NXP deal didn't happen or got done at $110 a
share. 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.
In a prepared statement, Qualcomm said Broadcom's lower bid
"made an inadequate offer even worse" and that its suitor continues
to refuse any negotiations about price.
In afternoon trading in New York, shares in Broadcom rose 1.4%
to $253.05, while Qualcomm shares fell slightly to $63.77. NXP
shares were little changed at $125.73.
The two bidding 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 Inc. after the cosmetics company repurchased
shares at a premium, he said, adding that MacAndrews ended up
raising its bid and ultimately prevailed.
Write to Ted Greenwald at Ted.Greenwald@wsj.com and Austen
Hufford at austen.hufford@wsj.com
(END) Dow Jones Newswires
February 22, 2018 02:47 ET (07:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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