Broadcom makes blockbuster $130bn takeover bid for Qualcomm in biggest ever tech deal

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Qualcomm is the target of a takeover by Broadcom (Source: Getty)

Broadcom has officially tabled an unsolicited bid for US chip making giant Qualcomm in a blockbuster deal valued at $130bn.

The deal, if it goes ahead, would be the biggest ever in the technology industry, eclipsing Dell's $67bn acquisition of EMC in 2015. 

Broadcom has made an offer of $70 per share - $60 in cash and $10 in stock - -and the deal includes $25bn of net debt. That's a 20 per cent premium on Qualcomm's closing price on Thursday (2 November), the day before reports first surfaced that a deal was on the cards.

"Broadcom's proposal is compelling for stockholders and stakeholders in both companies," Broadcom's chief executive and president Hock Tan said.

"Our proposal provides Qualcomm stockholders with a substantial and immediate premium in cash for their shares, as well as the opportunity to participate in the upside potential of the combined company."

Qualcomm said in a statement that it will "assess the proposal in order to pursue the course of action that is in the best interests of Qualcomm shareholders".

Recent reports suggesting Apple is considering dropping Qualcomm as a supplier for its iPhones and iPads had sent shares tumbling last week, making it a more appealing target. Broadcom is also a supplier to Apple.

Tan, known as a serial deal-maker, added that it "would not make this offer if we were not confident that our common global customers would embrace the proposed combination". 

"With greater scale and broader product diversification, the combined company will be positioned to deliver more advanced semiconductor solutions for our global customers and drive enhanced stockholder value," he said.

Qualcomm's $47bn deal for NXP, made last year but yet to be completed, is also factored in: Broadcom said the proposed offer stands whether that deal goes through or not.

The combined Broadcom and Qualcomm would become the third biggest chip supplier in the world behind Samsung and Intel.

But analysts are skeptical the deal will go ahead.

“This approach from Broadcom is fraught with challenges and in its current from is highly unlikely to proceed" said CCS Insight's Geoff Blaber.

“Qualcomm is likely to resist primarily on the basis that it undervalues the company and its growth opportunity in IoT. It is an unwelcome distraction for Qualcomm as it seeks to close the NXP acquisition, negotiate with regulators and work through the ongoing dispute with Apple."

He added: "Similarly, regulatory scrutiny is likely to be substantial and would add up to make this a highly risky transaction.”

Broadcom is in the middle of a separate deal for another US tech firm, Brocade, in a takeover valued at $5.5bn and agreed last year. The deadline for finalising it was pushed back at the start of October to allow more time for regulatory approval by US authorities, specifically the Committee on Foreign Investment in the United States (CFIUS) which assesses the national security implications of foreign investment in the US. That deal is now expected to close by 30 November.

The same US agency blocked the $1.3bn acquisition of US firm Lattice Semiconductor by Canyon Bridge, the Chinese private equity buyout fund which last week closed a £550m deal for the UK chip maker Imagination Technologies.

Broadcom made a timely announcement last week, saying that it plans to redomicile in the US from Singapore on a visit by Tan to the White House to meet with Donald Trump. It's legally domiciled in Singapore but is dual headquartered there and Silicon Valley.

Tan took over Broadcom when his firm Avago snapped it up in 2015 for $37bn, then the biggest ever chip deal.