Broadcom trims Qualcomm offer to $117 billion after new NXP deal

(Reuters) - Broadcom Ltd (AVGO.O) cut its bid for Qualcomm Inc (QCOM.O) on Wednesday by 4 percent to $117 billion, after the latter raised the stakes in the chipmaker takeover battle with a sweetened $44 billion agreement to acquire NXP Semiconductors NV (NXPI.O).

The move came after Broadcom called the new NXP deal a transfer of value from Qualcomm to NXP shareholders. Broadcom criticized Qualcomm on Wednesday for not liaising with it before raising its NXP bid, as proxy advisory firm Institutional Shareholder Services Inc had recommended.

With no new meeting scheduled yet between Qualcomm and Broadcom and tensions between the two rising, a showdown at Qualcomm’s shareholder meeting on March 6 looked increasingly likely. Broadcom has put forward six nominees for election to Qualcomm’s 11-member board as it seeks to force negotiations.

“Qualcomm’s board acted against the best interests of its stockholders by unilaterally transferring excessive value to NXP’s activist stockholders,” Broadcom said in its statement on Wednesday.

Qualcomm shares were trading down 1.2 percent at $63.24 in morning trading in New York on Wednesday, while Broadcom shares were flat at $249.72.

Qualcomm raised its offer for NXP from $110 to $127.50 per share in cash on Tuesday. In exchange, it received binding agreements from nine NXP stockholders that collectively own more than 28 percent of NXP’s outstanding shares to support the deal. These include hedge funds Elliott Advisors (UK) Ltd and Soroban Capital Partners LP, which had spearheaded opposition to the NXP deal and argued for a higher price.

Broadcom’s latest $82 per share cash-and-stock offer for Qualcomm was contingent on it buying NXP at its earlier offered price of $110 per share. Broadcom said on Wednesday that if the NXP deal goes ahead at $127.50, it will reduce the cash portion of its bid for Qualcomm by $3 per share.

Qualcomm is contractually obligated to complete the NXP deal, so that acquisition could only fall apart if not enough NXP shareholders support the tender offer or Chinas’ MOFCOM, the only regulator globally that has yet to approve the deal, blocks it.

Under the new terms agreed with NXP’s board, the deal with Qualcomm is contingent on 70 percent of NXP’s shares being tendered, instead of the 80 percent threshold required in the earlier agreement signed in October 2016. Once this threshold is reached, Qualcomm can take over the entire company through a “second-step” transaction mechanism.

NXP shares were trading at $125.90 on Wednesday, close to the new deal price, indicating that most investors think the acquisition will go through.

Broadcom said on Wednesday other conditions of the proposed merger agreement remained unchanged, including an $8 billion breakup fee to be paid to Qualcomm should regulators thwart the deal.