Chipmakers Qualcomm Inc and Broadcom Ltd have decided to meet on Wednesday to discuss about the acquisition offer. San Diego-based mobile chipmaker Qualcomm board had unanimously rejected the $121 billion acquisition offer from Broadcom Ltd.
Paul Jacobs, Chairman of the Board, Qualcomm wrote in a letter addressed to Broadcom President and CEO Hock Tan that the offer materially undervalues Qualcomm and offered to meet and see if the companies can address the “serious deficiencies” in value and certainty in its proposal. According to Reuters, both the companies have agreed to meet on February 14 and will discuss the potential deal.
Broadcom had offered $121 billion to acquire Qualcomm and raised the stock price from $70 to $82. The company said it would pay $60 a share in cash while the remaining will be paid in the form of Broadcom stocks. Broadcom Ltd, headquartered in Irvine, California, also offered to pay an additional $8 billion breakup fee in case antitrust regulators block the deal.
Qualcomm said the deal still undervalues the company especially at a time when it continues to dominate in future technologies such as augmented reality and 5G wireless network. The rejection of Broadcom’s deal by the Qualcomm board meant that the final call would be taken by Qualcomm shareholders who will vote on March 6 to decide whether to retain existing Qualcomm board or replace it with Broadcom nominated members.
Reuters adds that both companies are planning to meet proxy advisory firms ISS and Glass Lewis before their February 14 meeting to argue why Qualcomm shareholders should back them while voting for the future of Qualcomm on March 6. Broadcom had requested to meet over the weekend but Qualcomm seems to have finalized Valentine’s Day instead.
Qualcomm is the leader in the mobile chip business and it is already leading peers with the demo of its 5G modem for next generation smartphones. The company recently signed agreement with 18 OEMs to include its Snapdragon X50 5G modem in their mobile devices and has also commenced testing the technology with leading telecom service providers.
Qualcomm also faces a risk of losing out key client such as Apple and Samsung who are trying to negotiate cheaper price for the modem chips. Apple is reportedly planning to switch entirely to Intel-made modem for future iPhone models. Broadcom, on the other hand, has a good working relationship and could negotiate peace between Qualcomm and Apple with a fair deal for both the companies.
Broadcom CEO Hock Tan has been spearheading the company’s strategy to acquire companies leading in a particular segment to establish itself as a leader in the semiconductor business. The acquisition of Qualcomm with benefit Broadcom not only with future technologies, but also by getting access to Dutch semiconductor manufacturer NXP, which Qualcomm has agreed to acquire for $47 billion.