Last Thursday, we told you that Qualcomm had rejected Broadcom's $121 billion offer to buy the company. The $82 a share bid includes $60 in cash and $22 in Broadcom stock, and reportedly features a higher than average break-up fee. This is a cash settlement that Qualcomm would receive in case U.S. regulators decide not to clear a transaction between the two chipmakers. In a published letter from Qualcomm Chairman Paul Jacobs to Broadcom president and CEO Hock Tan, Jacobs mentioned two things that prevent Qualcomm from agreeing to the deal. One is valuation, and the second is "deal certainty."
Qualcomm believes that it is worth more than $121 billion, especially in light of its nearly completed purchase of NXP Semiconductors NV for $38 billion. In his letter, Jacobs says that both companies should discuss the pricing of the transaction during a face-to-face meeting between the two firms. As for "deal certainty," Jacobs' letter states that Qualcomm would be "enormously and irreparably damaged" if it agrees to the Broadcom transaction and regulators decide not to sign off on it. Broadcom believes that it has addressed this issue by including the aforementioned break-up fee.
Yesterday, Qualcomm filed documents with the SEC related to its rejection of Broadcom's bid. The filing notes that two companies responsible for $1 billion in chip revenue said that they would probably stop doing business with Qualcomm if it is acquired by Broadcom. The two Qualcomm clients stated that they do not have confidence in Broadcom's ability to be a technology leader.
Despite Qualcomm's rejection of the bid, Broadcom still is continuing with its proxy battle. This means that on March 6th, Qualcomm stockholders get to vote on whether to replace the company's current Board of Directors with nominees submitted by Broadcom. If Broadcom's replacements win, they will most likely approve the $121 billion package, and the deal will be agreed to. Considering that Qualcomm's shares closed the week at $63.99, it seems that investors don't expect Broadcom's proxy battle to succeed.