Broadcom makes move in possible hostile takeover of rival Qualcomm

Posted at 8:08 AM, Dec 04, 2017
and last updated 2017-12-04 23:59:07-05

SAN DIEGO (KGTV) - Broadcom is looking to initiate a hostile takeover of rival chipmaker Qualcomm.

The San Diego-based company confirmed Monday that Broadcom sent a list of candidates to replace its existing Board of Directors at the company's 2018 stockholders meeting.

In a statement on this latest maneuver by Broadcom, Qualcomm officials said:

Broadcom and Silver Lake are effectively asking stockholders to foreclose options and make a decision now on a non-binding proposed transaction which could not be completed for well over a year, if ever, given the magnitude of regulatory issues, the absence of commitments by Broadcom to resolve those issues, Broadcom's lack of committed financing, and the uncertainty surrounding its transition from Singapore to the United States. Qualcomm's Board is composed of 11 world-class directors, 9 of whom are independent and 4 of whom have been added in the last 3 years, and all of whom are firmly committed to acting in the best interests of all Qualcomm stockholders. Qualcomm believes that this action is a blatant attempt to seize control of the Qualcomm Board in order to advance Broadcom's acquisition agenda. These nominees are inherently conflicted given Broadcom's desire to acquire Qualcomm in a manner that dramatically undervalues Qualcomm to Broadcom's benefit.

Broadcom has been attempting to acquire its rival for some time. On Nov. 6, the company made an offer to buy Qualcomm for over $100 billion.

Qualcomm rejected the offer a week later, stating Broadcom's proposal "dramatically undervalues Qualcomm and comes with significant regulatory uncertainty, and therefore is not in the best interests of Qualcomm stockholders."

A purchase of Qualcomm would have made Broadcom the third-largest chip-maker, behind Intel Corp. and Samsung Electronics Co.

Local financial adviser Dennis Brewster likens the takeover bid to an election, with Broadcom on one side and Qualcomm leadership on the other - all stumping for votes.

"If you have a million shares, you have a million votes," said Brewster of SagePoint Financial.

Brewster says both camps will be trying to woo large shareholders, like mutual funds. Broadcom is hoping to get the votes to insert a new board of directors that will approve its takeover offer.

"Because the stock has been sideways for a number of years, it might be easier for Broadcom to sway those shareholders," said Brewster.

If Broadcom wins out, Brewster believes there will be local layoffs of jobs dubbed redundant. The number of those jobs could be determined in part by the sweetness of Broadcom's offer.

"If the bid keeps going higher and higher and their costs are higher, they may need to make more cuts," said Brewster.

The fate of that takeover bid could be sealed in March at the annual meeting. If Broadcom is successful, Brewster says Qualcomm's headquarters would move from San Diego to San Jose, the site of its just-announced new headquarters.

Brewster says that could mean the loss of some high-paying local jobs and corporate giving.

In a statement on his company's latest move, Broadcom President/CEO Hock Tan said:

"We have heard from many Qualcomm stockholders who have expressed their desire for Qualcomm to engage with us. 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. The nominations give Qualcomm stockholders an opportunity to voice their disappointment with Qualcomm's directors and their refusal to engage in discussions with us. In light of the significant value our proposal provides for Qualcomm stockholders, we believe Qualcomm stockholders would be better served by new independent, highly qualified nominees who are committed to maximizing value and acting in the best interests of Qualcomm stockholders."