Broadcom: proposal to acquire Qualcomm

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Hock Tan, President and Chief Executive Officer of Broadcom.

As reported on the company’s website, “Broadcom (a leading semiconductor device supplier to the wired, wireless, enterprise storage, and industrial end markets) announced a proposal to acquire all of the outstanding shares of Qualcomm for per share consideration of $70.00 in cash and stock. Under Broadcom’s proposal, the $70.00 per share to be received by Qualcomm stockholders would consist of $60.00 in cash and $10.00 per share in Broadcom shares. Broadcom’s proposal represents a 28% premium over the closing price of Qualcomm common stock on November 2, 2017, the last unaffected trading day prior to media speculation regarding a potential transaction, and a premium of 33% to Qualcomm’s unaffected 30-day volume-weighted average price. The Broadcom proposal stands whether Qualcomm’s pending acquisition of NXP Semiconductors N.V. is consummated on the currently disclosed terms of $110 per NXP share or the transaction is terminated. The proposed transaction is valued at approximately $130 billion on a pro forma basis, including $25 billion of net debt, giving effect to Qualcomm’s pending acquisition of NXP on its currently disclosed terms”.
“Broadcom’s proposal is compelling for stockholders and stakeholders in both companies. Our proposal provides Qualcomm stockholders with a substantial and immediate premium in cash for their shares, as well as the opportunity to participate in the upside potential of the combined company – said Hock Tan, President and Chief Executive Officer of Broadcom -. This complementary transaction will position the combined company as a global communications leader with an impressive portfolio of technologies and products. We would not make this offer if we were not confident that our common global customers would embrace the proposed combination. With greater scale and broader product diversification, the combined company will be positioned to deliver more advanced semiconductor solutions for our global customers and drive enhanced stockholder value. We have great respect for the company founded 32 years ago by Irwin Jacobs, Andrew Viterbi and their colleagues, and the revolutionary technologies they developed. Following the combination, Qualcomm will be best positioned to build on its legacy of innovation and invention. Given the common strengths of our businesses and our shared heritage of, and continued focus on, technology innovation, we are confident we can quickly realize the benefits of this compelling transaction for all stakeholders. Importantly, we believe that Qualcomm and Broadcom employees will benefit from substantial opportunities for growth and development as part of a larger company”. Broadcom explained the strategic and financial benefits of this operation on its website:
– it creates a leading diversified communications semiconductor company: Qualcomm’s cellular business is highly complementary to Broadcom’s portfolio, and the combination will create a strong, global company with an impressive portfolio of technologies and products.
-it accelerates innovation to deliver more advanced semiconductor solutions to global customers: as a result of enhanced scale, reach and financial flexibility, the combined company will benefit from the ability to accelerate innovation and deliver more advanced semiconductor solutions to its broad global customer base.
financial benefits: the combined company will have an enhanced financial profile, benefiting from Broadcom’s proven operating model with industry-leading margins. The combined Broadcom and Qualcomm, including NXP, will have pro forma fiscal 2017 revenues of approximately $51 billion and pro forma 2017 EBITDA of approximately $23 billion, including synergies. The transaction is expected to be accretive to Broadcom’s Non-GAAP EPS in the first full year after close.
Qualcomm confirmed that it has received a non-binding, unsolicited proposal from Broadcom. The Qualcomm Board of Directors, in consultation with its financial and legal advisors, said that it will assess the proposal in order to pursue the course of action that is in the best interests of Qualcomm shareholders. Qualcomm added that it will have no further comment until its Board of Directors has completed its review.

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