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Why Qualcomm Rejected Broadcom’s $121 Billion Takeover Bid

Broadcom offered $60 cash plus $22 in stock per Qualcomm share. Qualcomm rejected the proposal, and a U.S. order on national-security grounds ultimately stopped the takeover.
From TheFinanceBase Team2 min to read
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Qualcomm rejected Broadcom’s revised takeover proposal in February 2018, saying its $82-per-share offer undervalued the company and lacked the firm regulatory commitment Qualcomm wanted to protect against a failed deal. The proposal was widely described as worth $121 billion in total. The “talk to the hand” framing is a joke, not a quotation from Qualcomm. The deal was ultimately stopped by a U.S. government order on national-security grounds, and Broadcom withdrew on March 14, 2018.

What did Broadcom offer for Qualcomm?

Broadcom’s revised proposal offered Qualcomm shareholders $60 in cash and $22 in Broadcom stock per share, for stated consideration of $82 per share, according to Qualcomm’s February 2018 announcement. The American Bar Association’s 2018 legal analysis described the proposal’s aggregate value as $121 billion. The per-share terms and the aggregate figure are different measures, reported by different sources.

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It was not Broadcom’s first approach. Qualcomm said it had rejected an earlier unsolicited proposal on November 13, 2017. That proposal offered $60 cash plus $10 in Broadcom stock per share, or $70 per share on those stated terms. Qualcomm’s account of the earlier and revised proposals

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Why did Qualcomm’s board reject the revised bid?

Qualcomm said the price was too low

Qualcomm’s board unanimously rejected the revised offer, arguing that it materially undervalued the company. That was Qualcomm’s assessment, not an independently established valuation finding. In its February statement, the board wrote: “The Board has unanimously determined that your amended offer materially undervalues Qualcomm and falls well short of the firm regulatory commitment the Board would demand given the significant downside risk of a failed transaction.” Qualcomm’s rejection statement

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Deal certainty mattered as well as price

Qualcomm said it wanted a firm regulatory commitment because a transaction that failed after a prolonged review could leave the company bearing significant downside risk. Its board also said it had tried to engage Broadcom on price, regulatory matters and closing certainty, including at meetings in February 2018. That account comes from Qualcomm; the available statements are not an independent record of the negotiations. Qualcomm’s board statement on its discussions

How did the U.S. government stop the proposed takeover?

The national-security review was a separate strand from Qualcomm’s arguments about valuation and transaction certainty. In early March 2018, the Committee on Foreign Investment in the United States (CFIUS) raised national-security concerns, and Qualcomm said its annual meeting was delayed while the matter was investigated. Qualcomm’s announcement described the committee’s position; the operative government directions appear in the federal order. Qualcomm’s March 4 statement

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On March 12, 2018, the U.S. government issued an order requiring the parties to abandon the proposed takeover. The order also disqualified the listed Broadcom nominees from standing for election to Qualcomm’s board. The administration publicly explained its decision in national-security terms; the order itself set out the government’s directions. Federal Register order · Treasury statement on the President’s decision

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What happened to Broadcom’s offer?

Broadcom announced on March 14, 2018, that it had withdrawn and terminated its offer to acquire Qualcomm and withdrawn its director slate. The proposed takeover did not proceed. Broadcom’s withdrawal announcement

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