Qualcomm rejects Broadcom's unsolicited proposal

Largest ever tech takeover 'significantly undervalues' chipmaker

USA chipmaker Qualcomm Inc is making preparations to reject rival Broadcom Ltd's $103 billion bid as early as this week, four people familiar with the matter said on Sunday, setting the stage for one of the biggest-ever takeover battles.

Broadcom can now raise its bid or launch a hostile takeover by enlisting shareholders to its cause.

The rebuff ratchets up pressure on Broadcom to sweeten its offer or embark on a proxy battle, which carries its own risk of rejection by shareholders.

Broadcom said Monday that it remains committed to pursuing a deal.

Qualcomm announced late last night that its board of directors had "unanimously rejected" Broadcom's record-breaking offer, having agreed that the $70 per share bid "dramatically undervalues Qualcomm" and "comes with significant regulatory uncertainty". Broadcom also said its proposal stands regardless of whether Qualcomm's pending acquisition of NXP closes under its current terms or is nixed. "We would not make this offer if we were not confident that our common global customers would embrace the proposed combination". "We are confident in our ability to create significant additional value for our stockholders as we continue our growth in these attractive segments and lead the transition to 5G".

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Buying Qualcomm would reshape the chip industry, transforming Broadcom into the third-largest semiconductor maker, behind Intel Corp and Samsung Electronics Co. If it does sell to Broadcom, it means the combined businesses' chips will be present in more than a billion smartphones sold every year.

The deal would dwarf Dell Inc's US$67 billion acquisition of EMC in 2015 - then the biggest in the technology industry.

However, Qualcomm is likely to dig in for a lengthy siege.

Tan, who has built Broadcom through a series of transactions that have helped reshape the US$300 billion semiconductor industry, has previously been able to pull off deals with friendly approaches. We think Qualcomm is also aiming for a higher offer more in line with recent acquisition premiums relative to management's view of the firm's true valuation. That purchase is being held up by regulatory approval. That being said, all of this could be decided as early as next week, with Qualcomm's board of directors reportedly planning on meeting on Sunday to review the offer and come up with a strategy.

And CEO Steve Mollenkopf said that Qualcomm well positioned for continual growth.

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