Broadcom lowers buyout bid, for Qualcomm, making ‘inadequate offer even worse’

Broadcom trimmed its hostile takeover offer for Qualcomm by $4 billion on Wednesday in the wake of the San Diego company agreeing to pay more for Dutch automotive chip maker NXP Semiconductors, a move which Broadcom opposes.

But Broadcom said it remains committed to acquiring Qualcomm even with NXP in tow.

Broadcom’s new offer is $79 per share — $57 in cash and $22 in Broadcom stock — should NXP be included in the deal. That price values Qualcomm at $117 billion.

“Broadcom’s reduced proposal has made an inadequate offer even worse despite the clear increase in value to Qualcomm stockholders from providing certainty around the NXP acquisition,” Qualcomm said in a statement. “Broadcom has refused and continues to refuse to engage with Qualcomm on price.”

Its original offer of $82 per share stands if Qualcomm can’t close NXP, which makes chips used in cars and is a key cog in the San Diego company’s growth strategy to diversify its business beyond smartphones.

The $82 per share offer consists of $60 in cash and $22 in Broadcom stock and values Qualcomm at $121 billion, which Broadcom had described as its “best and final” offer.

The lowered bid Wednesday is the latest twist in a complicated corporate drama between these three giants in the chip industry. Qualcomm on Tuesday increased its offer for NXP to $127.50 a share, or about $44 billion, up from $38 billion. It also announced that it had won support from key shareholders, including Elliott Management Corp.

Broadcom blasted the higher price as transferring $6.2 billion in value from Qualcomm shareholders to NXP shareholders.

“Qualcomm’s board acted against the best interests of shareholders by unilaterally transferring excessive value to NXP’s activist stockholders,” Broadcom said in a statement.

Qualcomm maintains that NXP is a good deal that’s forecast to boost Qualcomm’s adjusted profits by $1.50 a share next year. It also expands Qualcomm’s footprint in fast growing automotive and Internet of Things industries and provides a safety net for shareholders should a Broadcom hostile takeover fail antitrust regulatory review.

Qualcomm’s NXP acquisition has received approval from eight global regulators but still needs the green light from China.

If completed, it would make Qualcomm more expensive for Broadcom to acquire, and likely complicate an already difficult antitrust review of the Qualcomm-Broadcom combination — which would be the largest semiconductor merger ever.

Qualcomm contends Broadcom’s offer ignores its growth prospects from 5G and the expansion of cellular technologies beyond smartphones and into other industries.

“Broadcom’s revised $79 per share proposal materially undervalues Qualcomm, fails to take into account the strategic and financial benefits of acquiring NXP, and continues to face a long and highly uncertain path to regulatory approvals,” according to Qualcomm.

Everything comes to a head in early March. NXP shareholders are expected to tender their shares by 9 p.m. Pacific Time on March 5. On March 6 Qualcomm shareholders will vote for either Broadcom’s candidates or Qualcomm’s existing board at its annual shareholder meeting.

Broadcom has urged Qualcomm shareholders to support the six alternative candidates it has nominated to Qualcomm’s board of directors — which would give it majority control of Qualcomm’s 11-member board of directors to push its hostile takeover through.

Bernstein Research analyst Stacy Rasgon said it’s difficult to guess how shareholders will view these latest moves.

On one hand, a raised NXP bid and lower Broadcom offer “might make Qualcomm shareholders more inclined to give Qualcomm management the benefit of the doubt” and reject Broadcom’s board nominees.

On the other hand, Qualcomm shareholders might feel more comfortable supporting Broadcom’s slate given that NXP provides a back-up plan should regulators block a Broadcom-Qualcomm merger.

“We would not attempt to call the vote but suspect it will be close and believe Broadcom is likely to win at least some board seats — even if their quest for a majority fails,” said Rasgon in a report.

Qualcomm’s shares slipped 59 cents to close at $63.40 on Wednesday. Broadcom’s shares fell $1 to $248.63. Both companies’ shares trade on the Nasdaq.

mike.freeman@sduniontribune.com;

Twitter:@TechDiego

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UPDATES:

This story was updated at 1 p.m. to include Qualcomm comments and stock prices.