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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