Published: Thu, November 09, 2017
Tech | By Dwayne Harmon

Unsolicited bid: Broadcom eyes Qualcomm

Unsolicited bid: Broadcom eyes Qualcomm

As a unit, the two companies would benefit from cost synergies, according to Canaccord Genuity, while the bank's analysts also expect Qualcomm will reject this initial offer.

Earlier this week we learned that rival chip maker, Broadcom, would be making a $130 billion bid for Qualcomm.

Qualcomm said in a statement that Broadcom's unsolicited offer consisted of $60 per share in cash and $10 per share in Broadcom's stock.

And since Qualcomm and Broadcom's combined China income surpasses 2 billion yuan ($300 million) and their combined global revenues in the past year were over 10 billion yuan ($1.5 billion), the Chinese government has enough to legally warrant an investigation.

Broadcom officials said a combined company would be a "global communications leader". Given the increasing complexity and cost in new generation semiconductor design and manufacturing, we believe that the increased scale and product and end market diversification would potentially drive stronger profitability metrics for a combined entity.

Qualcomm said Monday that its directors were assessing Broadcom's bid and would act in their shareholders' best interest.

Broadcom is now on the rise after it announced its plans to fully move its company to the United States. The stock soared Friday, closing at $61.81 after The Wall Street Journal reported that Broadcom was considering a bid. He thinks there is room for the Broadcom bid to increase to the high-$70 to low-$80 per share range.

But any deal would need to pass muster with Qualcomm shareholders and could face regulatory scrutiny in the United States and other markets. Qualcomm chips power numerous world's top smartphone models, including the Samsung Galaxy S8 and S8 Plus, and the Google Pixel 2 and Pixel 2 XL. Another source speaking with the paper said that the offer is seen as "opportunistic" as share prices have dipped in the wake of Qualcomm's legal battle with Apple. He added that it would have "an impressive portfolio of technologies and products".

"The Qualcomm shareholders are likely to be split with many viewing this opportunity as a solution to the worsening relations with Apple, whom Broadcom has a good relationship with", Carlaw said. Qualcomm itself is in talks to take over NXP Semiconductors.

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