Broadcom Gets Hock-tile With Qualcomm


By: R. Scott Raynovich

The ever-acquisitive Broadcom (AVGO) CEO Hock Tan shows he's not going to back down easily. Today the global semiconductor company sent a strong signal that they will do what it takes to succeed in a bid to take over Qualcomm (QCOM) for about $105 billion in cash and stock by proposing to replace all of the Qualcomm board of directors.

Broadcom proposed 11 nominees to Qualcomm's board with a slate of more independent directors, who would of course would be more sympathetic to Broadcom's goal of merging with Qualcomm. Broadcom on November 6th announced its bid for San Diego-based Qualcomm for $70 per share but that offer was quickly rebuffed by the Qualcomm board as too cheap.

Moving toward a proxy fight

The move to replace Qualcomm directors signals the deal is quickly escalating in hostility and moving towards a proxy battle. Both companies also ratcheted up the rhetoric in public statements.

"We have heard from many Qualcomm stockholders who have expressed their desire for Qualcomm to engage with us," Broadcom's Tan said in a statement on Monday. "We also continue to receive positive feedback from customers and, having had initial meetings with certain relevant antitrust authorities, remain confident that any regulatory requirements necessary to complete a combination will be met in a timely manner. Although we are taking this step, it remains our strong preference to engage in a constructive dialogue with Qualcomm. We have repeatedly attempted to engage with Qualcomm, and despite stockholder and customer support for the transaction, Qualcomm has ignored those opportunities."

A statement from Qualcomm said Broadcom's actions were a "blatant attempt to seize control of the Qualcomm board in order to advance Broadcom's acquisition agenda."

Well, duh.

Broadcom nominates independent directors

As Futuriom has reported, the deal is being closely watched because not only could it result in the largest tech merger in history, it would significantly reshape the semiconductor industry, creating a dominant powerhouse in communications, mobile, and Internet of Things (IoT) chips.

Many Wall Street analysts still expect Broadcom to increase its bid from $75 per share, although Qualcomm shares fell today. Qualcomm was recently trading at $64.38, down $1.11 (-1.69%), on the news.

Reuters was the first press outfit to report Broadcom's intention to nominate new board members. The same media company also had the first scoop on the deal on November 3rd. On November 22, a Reuters story says Broadcom is considering sweetening the deal.

Broadcom's efforts seem straightforward: Get some board nominees that are favorable to the takeover and then proceed to a shareholder proxy fight -- with a possible sweetened offer. It's classic corporate chess.

The list of nominees submitted by Broadcom includes nine men and two women, including Samih Elhage, former president of the mobile networks business group of Nokia (NOK); Veronica M. Hagen, retired President and CEO of Polymer Group, Inc.; John H. Kispert, Managing Partner of Black Diamond Ventures; and Harry L. You, President, CFO and Director of GTY Technology Holdings Inc. who also previously served as Executive Vice President in the Office of the Chairman of EMC Corporation.

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