Qualcomm's Board Unanimously Rejects Broadcom Offer

Qualcomm's Board Unanimously Rejects Broadcom Offer

Now we'll have to see if Broadcom returns with a bigger offer (though its initial proposal represented a 28% premium over Qualcomm's share price before Broadcom's plans were reported in the press) or simply gives up. It signals directors believe Qualcomm can boost its stock price higher than the offer of $70 a share, a 28% premium to its price November 2, before The Wall Street Journal reported the bid was imminent.

The company on Monday rejected an unsolicited $130 billion takeover bid by Broadcom that would have been the second-largest deal in American corporate history.

Meanwhile, Qualcomm is trying to acquire NXP for $38 billion but NXPs shareholders are reluctant. Today's Broadcom is the product of a $37 billion combination in 2016 between Avago, a Singapore-based company that was once part of a former unit of pioneering PC maker Hewlett-Packard, and Broadcom, another company with origins in Southern California which made chips for tablets, smartphones and other telecom and cable applications. The sources said Broadcom was preparing to submit a slate of directors by Qualcomm's December 8 nomination deadline. If Qualcomm had approved the deal, the combined company would have created major changes in the chipmaking industry.

Overall, Broadcom's bid is a very ambitious attempt to grow its share of the market for components that go into mobile phones. In the statement, Qualcomm Chief Executive Paul Jacobs said Broadcom's unsolicited bid is simply not enough for Qualcomm to accept.

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On a more positive note, Canaccord Genuity's Mike Walkley, reiterating a Buy rating on Qualcomm, raises his price target to $83 from $76, writing that he thinks Broadcom will bid higher. The deal could hinge on Qualcomm resolving a conflict with Apple, which has grown over the past year.

"No company is better positioned in mobile, IoT, automotive, edge computing and networking within the semiconductor industry", said Qualcomm CEO Steve Mollenkopf.

Qualcomm's stock climbed 1.2% in premarket trading, while Broadcom declined 0.6%. They have forced Qualcomm to offer concessions, and may demand more.

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