Qualcomm Shuns Broadcom, Sets Up $105 Billion Proxy Fight

Qualcomm Shuns Broadcom, Sets Up $105 Billion Proxy Fight
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Qualcomm rejected Broadcom’s $105 billion acquisition offer, kicking off what would be the largest technology takeover battle in history, according to Bloomberg.

The company recommended shareholders spurn the deal, saying it’s an opportunistic move by Broadcom to buy the wireless-chip maker on the cheap. Qualcomm also said the transaction may face regulatory scrutiny that would cast doubt on its completion.

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. For now, Broadcom said it remains “ fully committed“ to going ahead with the purchase.

“It is the Board’s unanimous belief that Broadcom’s proposal significantly undervalues Qualcomm relative to the company’s leadership position in mobile technology and our future growth prospects,“ said Paul Jacobs, executive chairman and chairman of the board of Qualcomm, in a statement.

Broadcom CEO Hock Tan last week offered $70 a share in cash and stock for Qualcomm, seeking to build a powerhouse that leads the market for wireless chips in mobile devices. Even before Qualcomm’s response, Tan and his advisers were preparing to wage a proxy battle in which they appeal directly to Qualcomm investors.

Tan said he’s pleased with the reaction he’s already received from Qualcomm shareholders and customers regarding his proposal and would prefer to keep the negotiations friendly. “We have received positive feedback from key customers about this combination,“ he said in a statement. “We continue to believe our proposal represents the most attractive, value-enhancing alternative available to Qualcomm stockholders and we are encouraged by their reaction. “

Buying Qualcomm would reshape the chipmaking industry, transforming Broadcom into the third-largest semiconductor maker, behind Intel and Samsung. The combined business would instantly become the default provider of a set of components needed to build each of the more than a billion smartphones sold every year.

“After a comprehensive review, conducted in consultation with our financial and legal advisors, the board has concluded that Broadcom’s proposal dramatically undervalues Qualcomm and comes with significant regulatory uncertainty,“ said Tom Horton, the company’s presiding director, in the statement. “We are highly confident that the strategy Steve and his team are executing on provides far superior value to Qualcomm shareholders than the proposed offer.“