Broadcom mulls raising offer for Qualcomm

US chipmaker Broadcom is considering raising its offer to buy rival Qualcomm Inc after consulting with several of Qualcomm's top shareholders, Reuters yesterday reported, citing people familiar with the matter.

Broadcom is planning to offer more of its own stock, and while the timing of the new proposal is uncertain, Broadcom's bid preparations indicate that it will apply pressure on Qualcomm to engage in talks and also threaten to replace its board of directors, the report said.

Last week Qualcomm rejected Broadcom's $103-billion unsolicited takeover bid, saying that the offer undervalued the company and would face regulatory hurdles (See: Qualcomm set to reject Broadcom's $103 bn takeover bid).

Broadcom has offered to pay $60 per share in cash and $10 per share of its own stock.

Qualcomm CEO Steven Mollenkopf had solicited feedback from the company shareholders, and felt that Broadcom's $70 per share bid undervalues the company and does not price in the uncertainty associated with getting the deal approved by regulators.

Qualcomm's shareholders have indicated to Broadcom that it should raise its bid to at least $80 per share in order to hold talks.

Broadcom CEO Hock Tan, who earlier this month said that he would re-domicile his company to the US from Singapore, has stated he is open to launching a takeover battle.

Broadcom is also preparing to submit a slate of directors to Qualcomm's 8 December nomination deadline. That would allow Qualcomm shareholders to vote to replace the company's board and force it to engage with Broadcom.

Qualcomm provides chips to carrier networks to deliver broadband and mobile data.

It is currently engaged in a patent infringement dispute with Apple Inc, and is also trying to close its $38 billion acquisition of automotive chipmaker NXP Semiconductors NV after signing a deal in October 2016.

Broadcom has indicated it is willing to acquire Qualcomm irrespective of whether the latter closes the NXP deal or not.

NXP shares have been trading above Qualcomm's offer price, as many NXP shareholders, including hedge fund Elliott Management Corp, have been holding out for a better price. Qualcomm does not plan to significantly raise its price for NXP as a defensive strategy to make its acquisition by Broadcom more expensive, according to media reports.

Broadcom, created in 2016 when Avago Technologies Ltd acquired Broadcom Corp for $37 billion, has built itself from a former Hewlett Packard division into one of the largest chipmakers via a string of purchases.

Broadcom, which counts Apple Inc among its largest customers, is among the five largest chip manufacturers and has an annual turnover of $13.24 billion.

Its product portfolio serves multiple applications within four primary end markets: wired infrastructure, wireless communications, enterprise storage and industrial & others.

Applications for its products in these end markets include: data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems, and displays.