Qualcomm to reject Broadcom's $130bn takeover bid

Broadcom will almost certainly increase its offer in a bid to get shareholders on side

Qualcomm will reject Broadcom's $130bn takeover bid, according to reports, with a response expected this week.

Broadcom set out its offer to buy the company only last week, although its formal tabling of an offer had followed months of speculation. However, Qualcomm is apparently not happy with the deal and is planning to reject Broadcom's offer.

One of the biggest-ever proposed takeovers, it's believed that Qualcomm's board of directors met on Sunday to discuss the deal.

Sources claim that the company is working on a "rejection strategy", and could deliver a response to Broadcom later today, but will likely take longer than that.

According to Reuters, Qualcomm CEO Steven Mollenkopf has been getting feedback from major shareholders, who feel that Broadcom is undervaluing the company.

Qualcomm also believes that the offer doesn't reflect the price associated with getting sufficient regulatory approval. This process would likely be lengthy too.

Broadcom has offered a price of $70 per share, but the usual 'people familiar with the situation', quote by the Financial Times just before the deal went public, suggested that it could go up to $80 per share. If the deal were to go ahead, though, Broadcom could move its HQ back from Singapore to the US.

Broadcom, though, is keen to push ahead as quickly as possible. It wants to submit a shareholder nomination deadline by 8 December and is looking to extend its debt financing. There is no timeline for this process, though.

Qualcomm is no stranger to major acquisitions, either. In 2016, it signed a deal to buy motoring chipmaker NXP Semiconductors for $38bn, but this is still going through the process of regulatory approval.

Ray Chohan, senior vice president of corporate strategy at analytics firm PatSnap, believes this deal should have a positive impact on the technology industry despite these rumours. "Broadcom's proposed bid for Qualcomm is certainly an exciting prospect," he said.

"While it has been reported that Qualcomm will dismiss this bid, we've analysed the two companies' intellectual property portfolios in order to see what the merger may look like.

"First, the comparative size difference of the two companies' patent portfolios is substantial. Qualcomm has over 170,000 patents, estimated to be worth over $29.2bn, while Broadcom has just over 14,500 patents estimated to be worth around $3.3bn.

"Qualcomm, comparatively speaking, files patents at a much higher rate. Surprisingly, however, both companies have a very similar IP portfolio strategy focused on tech specialisation, meaning that a merger may make sense in terms of aligned goals.

"Interestingly, despite Qualcomm's penchant for high-profile IP litigation suits, both companies have a similar history of actively asserting their IP through the law. Qualcomm does, however, hold each of the top-ten most asserted patents between the two companies," said Chohan.

He added: "While Qualcomm produces the most revenue between the two companies, Broadcom's turnover in the past year has been over half of Qualcomm's, generated with just a fraction of the intellectual property.

"Looking at the technology areas, Broadcom has its foot in the door of markets dominated by Qualcomm, including wireless communications and mobile and computing devices.

"With the potential acquisition of Qualcomm, Broadcom would become the heavyweight in this market next to players like ZTE, Huawei, LG and Samsung."