Qualcomm rejects Broadcom’s revised buyout offer, proposes meeting

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(Reuters) – U.S. semiconductor company Qualcomm Inc (QCOM.O) on Thursday rejected Broadcom Ltd’s (AVGO.O) revised $121 billion buyout offer, but proposed meeting its peer to see whether they can address what it called the bid’s “serious deficiencies in value and certainty.”

Qualcomm’s response attempts to strike a balance between continuing to resist Broadcom’s takeover attempt and heeding the calls of some Qualcomm shareholders, who urged the company in recent days to engage with its rival in case it can clinch an attractive deal.

Qualcomm said Broadcom’s latest $82 per share offer, comprising $60 per share in cash and $22 per share in stock, “materially undervalues” Qualcomm and falls short of the firm regulatory commitment it would demand given the significant antitrust risks involved.

Broadcom did not immediately respond to requests for comment.

Even though Broadcom has promised to pay a large breakup fee in the event regulators thwart the deal, as well as a “ticking” fee if the deal takes more than 12 months to close, Qualcomm believes Broadcom needs to offer a “hell-or-high-water” legal commitment to complete the deal irrespective of divestitures which antitrust watchdogs around the world may require.

“If you are not willing to agree to do whatever is necessary to ensure a transaction closes, we will need you to be extremely clear and specific about exactly what actions you would refuse to take, so that we can properly evaluate the risk to Qualcomm’s shareholders,” Qualcomm Chairman Paul Jacobs wrote to Broadcom CEO Hock Tan in a letter published by Qualcomm.

The takeover battle is at the heart of a race to consolidate the wireless technology equipment sector, as smartphone makers such as Apple Inc (AAPL.O) and Samsung Electronics Co Ltd (005930.KS) use their market dominance to negotiate down chip prices.

Broadcom has nominated a slate of directors to replace Qualcomm’s board. Qualcomm shareholders will get to vote on these nominations at a March 6 meeting.

Broadcom said on Monday its improved offer was premised on either Qualcomm acquiring NXP Semiconductors NV (NXPI.O) at the current disclosed terms of $110 per share in cash, or the $38 billion transaction being terminated.

NXP shareholders, led by activist hedge fund Elliott Management Corp, are resisting the deal, pushing for Qualcomm to raise its offer. NXP shares ended trading at $115.94 on Thursday, indicating investors were expecting a sweeter deal.

Qualcomm’s proposed acquisition of NXP was approved by European Union antitrust regulators last month. Qualcomm expects China’s blessing later this month, at which point it has to decide whether it would raise its offer.