SAN DIEGO (KGTV/CNS) - Broadcom has offered to buy San Diego-based rival chipmaker Qualcomm for $130 billion.
In a note to investors posted on its website Monday, Broadcom announced a "proposal to acquire all of the outstanding shares of" Qualcomm "for per share consideration of $70.00 in cash and stock."
The note added: "The proposed transaction is valued at approximately $130 billion on a pro forma basis, including $25 billion of net debt, giving effect to Qualcomm's pending acquisition of NXP on its currently disclosed terms."
In the note, Broadcom President and CEO Hock Tan said:
"Broadcom's proposal is compelling for stockholders and stakeholders in both companies. Our proposal provides Qualcomm stockholders with a substantial and immediate premium in cash for their shares, as well as the opportunity to participate in the upside potential of the combined company. This complementary transaction will position the combined company as a global communications leader with an impressive portfolio of technologies and products. We would not make this offer if we were not confident that our common global customers would embrace the proposed combination. With greater scale and broader product diversification, the combined company will be positioned to deliver more advanced semiconductor solutions for our global customers and drive enhanced stockholder value.
We have great respect for the company founded 32 years ago by Irwin Jacobs, Andrew Viterbi and their colleagues, and the revolutionary technologies they developed. Following the combination, Qualcomm will be best positioned to build on its legacy of innovation and invention. Given the common strengths of our businesses and our shared heritage of, and continued focus on, technology innovation, we are confident we can quickly realize the benefits of this compelling transaction for all stakeholders. Importantly, we believe that Qualcomm and Broadcom employees will benefit from substantial opportunities for growth and development as part of a larger company."
According to the note, Broadcom "expects that the proposed transaction would be completed within approximately 12 months following the signing of a definitive agreement."
It has been previously reported that Broadcom is looking to relocate its company headquarters from Singapore to the U.S.
Buying Qualcomm would make Broadcom the third-largest chip-maker, behind Intel Corp. and Samsung Electronics Co., Bloomberg reported. The combined business would become the default provider of a set of components needed to build each of the more than a billion smartphones sold every year, according to Bloomberg.
In a statement Monday, Qualcomm said it would "assess the proposal in order to pursue the course of action that is in the best interests of Qualcomm shareholders."
Bloomberg reported that Qualcomm "is preparing to fend off the unsolicited offer" because it undervalues the company and is an opportunistic move to buy it on the cheap. Management will recommend that shareholders reject the takeover bid, according to Bloomberg.
Like Qualcomm, Broadcom is a major supplier of parts of Apple products. Qualcomm and Apple have been embroiled in a court dispute over royalties.
Qualcomm last week reported a plunge in net earnings for the fourth quarter -- to $168 million, or 11 cents per diluted share, compared to $1.6 billion, or $1.07 per diluted share, in the same period in 2016. For the full fiscal year, net income was $2.47 billion, or $1.65 per diluted share, compared to $5.7 billion, or $3.81 per diluted share, last year.
The impact in San Diego of the potential takeover -- which would end up being the largest ever in the electronics industry -- wasn't immediately clear, but it could be tremendous. Qualcomm is one of the few major corporations with a global reach to be headquartered in a city known mainly for tourism, and smaller defense and life sciences firms.
Qualcomm is one of the region's largest private employers, and the family of co-founder Irwin Jacobs are one of the area's most generous philanthropists.