Broadcom Ltd. is considering a bid of more than $100 billion for Qualcomm Inc., according to people familiar with the matter, in what would be the biggest-ever takeover of a chipmaker.
According to Bloomberg.com, Broadcom is speaking to advisers about the potential deal, said the people, “who asked not to be identified because talks are private”. The offer of about $70 a share would include cash and stock and is likely to be made in the coming days, the people said to Bloomberg. A final decision on whether to proceed has not been made, they said.
Qualcomm, based in San Diego, is the designated purchaser of Eindhoven based NXP Semiconductors NV. The $47 billion deal is facing regulatory scrutiny in Europe and opposition from some shareholders including activist hedge fund firm Elliott Management Corp., which has argued the offer undervalues NXP.
Qualcomm finds itself in a weakened state. A legal battle with Apple is costing revenue and jeopardizing a business model that for years made Qualcomm one of the most successful chipmakers. Before today, its shares had slumped 16 percent this year, compared with a 41 percent surge in the Philadelphia Semiconductor Index.
A change of management at Qualcomm might help resolve the dispute with Apple more quickly, and thereby make Qualcomm’s licensing and chip businesses more valuable, according to Sanford C. Bernstein & Co. analyst Stacy Rasgon. Earlier this week, Qualcomm executives said the legal process would “proceed under the court’s schedule,” indicating no resolution soon.
“Maybe they have a better relationship with Apple, maybe they settle,” Rasgon said.
Broadcom is a major supplier of iPhone parts that counts Apple among its largest customers. At issue between Qualcomm and Apple are licensing fees the chipmaker charges for patents that cover the basics of how mobile phone systems work. Apple contends Qualcomm is unfairly charging too much and illegally taking advantage of its market position in chips. Qualcomm has countered that Apple, one of its largest customers, has lied to regulators in an unfair attempt to bully its opponent into charging less.
Qualcomm shares rose as much as 19 percent in New York on Friday, in their biggest intraday move since October 2008, after Bloomberg News first reported the takeover plans. They closed up 13 percent at $61.81, valuing the company at $91 billion. Broadcom rose 5.5 percent, for a market valuation of about $112 billion.
Representatives for Broadcom and Qualcomm declined to comment to Bloomberg.
