Chip maker Qualcomm rejects $130 bn Broadcom merger bid

Qualcomm turns down Broadcom's $130 billion offer

Qualcomm turns down Broadcom's $130 billion offer

(It could also make both moves, of course, targeting shareholders with better terms than the first proposal held.) Or, as Barron's pointed out, Broadcom could make more hostile moves, such as trying to nominate allies to Qualcomm's board. Qualcomm also said the transaction may face regulatory scrutiny that would cast doubt on its completion.

Broadcom has offered to pay $105 billion for Qualcomm, potentially creating the world's biggest chip supplier in one transaction.

However, Qualcomm needs to decide if it's open to accept Broadcom's offer.

Qualcomm shares closed at $64.57 on Friday, while Broadcom ended at $264.96. At the time, Bloomberg sources claimed that Qualcomm's board would likely reject the deal.

"We continue to believe our proposal represents the most attractive, value-enhancing alternative available to Qualcomm stockholders and we are encouraged by their reaction", Broadcom CEO Hock Tan said.

"Qualcomm shareholders are likely to hold out for more, but we believe something in the $80-ish range is likely enough to bring a lot of them around", Stacy Rasgon, an analyst at Sanford C. Bernstein wrote in a note published over the weekend.

Qualcomm Chief Executive Steven Mollenkopf has spent the past few days soliciting feedback from Qualcomm shareholders, and feels that Qualcomm's $70-per-share bid undervalues the company and does not price in the uncertainty associated with getting the deal approved by regulators, according to the sources.

It comes as Qualcomm seeks a $47 billion acquisition of Dutch rival NXP, a deal that is the subject of an European Union anti-trust probe.

"It is the board's unanimous belief that Broadcom's proposal significantly undervalues Qualcomm relative to the company's leadership position in mobile technology and our future growth prospects", said Paul Jacobs, executive chairman and chairman of the board of Qualcomm, as cited in a company press statement. "We are highly confident that the strategy Steve and his team are executing on provides far superior value to Qualcomm shareholders than the proposed offer", said Tom Horton, presiding director for Qualcomm. "Broadcom has to convince those companies that they stand to benefit".

Importantly, Broadcom didn't immediately up its bid for the competitor, and it isn't at all clear that Qualcomm is interested in satisfying Tan's "strong preference" of engaging cooperatively.

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