Qualcomm rejects latest Broadcom bid, but agrees to meet

Friday 9 February 2018 | 08:35 CET | News
Update: 9 February 2018 | 10:57 CET

Qualcomm has rejected the improved takeover offer from Broadcom, saying it undervalues the company and has too much regulatory uncertainty. However, the company has agreed to meet with Broadcom to see if they can reach an agreement on new terms. 

Despite the significant increase in price by Broadcom, Qualcomm said its board, assisted by its financial and legal advisors, determined that the offer "materially undervalues" the company. In addition, the proposal "falls well short of the firm regulatory commitment the board would demand given the significant downside risk of a failed transaction", Qualcomm said.  

In a letter to Broadcom's CEO, Qualcomm outlined a number of questions it wants answered in talks with Broadcom, including whether this is really the company's "final" price, or could it pay more than USD 82 per Qualcomm share. Furthermore, would Broadcom be willing to commit to "whatever actions are necessary to ensure the proposed transaction closes", Qualcomm asked. The company fears losing customers during or after an extended regulatory review period, and if the merger did not close, could see its business model threatened. 

Qualcomm said it would contact Broadcom to schedule a meeting for talks. Broadcom said in response that it was ready to meet in the coming three days, while Qualcomm had indicated 13 February at the earliest. This is after the two companies are expected to meet with the shareholder advisory firms ISS and Glass Lewis about their conflicting proposals for Qualcomm's AGM in March. 

Broadcom added that it met with Qualcomm's largest shareholders in the past week, and had "no doubt" that reaching a deal on a merger "is their strong desire as well". 

Ahead of the meeting, Broadcom sent a proposed merger agreement to Qualcomm. This includes a USD 8 billion fee if the merger is blocked by regulators and a 6 percent per year increase in the cash portion of the bid if it takes more than a year to complete the takeover. Broadcom also reiterated that USD 82 per Qualcomm share "is our best and final offer".

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