Even though Qualcomm has never said the company is up for sale, it has been receiving buyout offers from Broadcom, an aggressive suitor that has already dangled an unsolicited bid of $100 billion. That offer was unanimously rejected by Qualcomm's board of directors last November on the basis that it undervalued the company. Fast forward to today and Broadcom is reportedly planning to increase its bid to $120 billion.
People who are supposedly familiar with the matter told Reuters that Broadcomm is in the process of finalizing a formal offer that would value Qualcomm between $80 and $82 per share. The previous offer was for $70 per share, broken down into $60 per share in cash and $10 per share in stock. There is a bit of fuzzy math involved, as the reports at the time said that offer amounted to around $130 billion, though now it appears it was closer to $105 billion.
The new offer is a substantial bump that values Qualcomm around $15 billion higher than before. It also includes an undisclosed breakup fee that is higher than the usual 3 percent to 4 percent of the deal's size, which would be payable to Qualcomm if it agreed to the deal only to have regulators step in and nix it. That sometimes happens if regulators determine that a deal would create a monopoly in the marketplace or would otherwise be anticompetitive.
Broadcom is confident it would be able to complete a takeover within 12 months of inking a deal. Qualcomm, however, believes it would take 18 months or more to complete all of the necessary regulatory reviews, and that there are all kinds of risks involved.
The timing of the new offer comes as Qualcomm faces a $1.2 billion fine by the European Commission for abusing its dominant market position with regards to mobile baseband chipsets. Qualcomm is planning to appeal the fine, but if it sticks, there would be some additional value in selling to Broadcom since the burden of the fine would shift to the new owners.
Qualcomm is also engaged in a legal dispute with Apple over royalty payments. In addition, there is talk that Apple is looking to ditch Qualcomm completely as a supplier of baseband chipsets for its iPhone devices, and going all in with Intel. So, there are lots of angles for Qualcomm to consider.
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