Big asks

26 February 2018 By John Foley Follow @johnsfoley

The chipmaker laid down conditions for agreeing a merger – including boosting the proposed break fee to about $13 bln. Qualcomm is being reasonable but disingenuous. Its suitor would still have two very high bars to clear: raising the $120 bln price, and convincing regulators.

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Qualcomm on Feb. 26 laid out terms under which it would be prepared to negotiate the price of a roughly $120 billion takeover offer by rival chipmaker Broadcom.

In a letter to Broadcom Chief Executive Hock Tan, Qualcomm reiterated that the $79-a-share offer, reduced recently from $82, materially undervalued the company, but offered to enter into a period of bilateral due diligence.

Chairman Paul Jacobs said that Broadcom would also need to commit to doing whatever antitrust regulators require, within certain limits, to get the deal approved, and increase the “reverse termination fee” payable if the merger fails, to 9 percent of the deal’s value including debt.

Broadcom agreed in a meeting on Feb. 23 to drop restrictions on how Qualcomm could operate its business of licensing chips to smartphone handset makers during the period before an agreed deal closed, the letter said.

Qualcomm shares were trading at $64.80 as of 1000 EST on Feb. 26, 2.3 percent above their closing price on Feb. 23.

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