Broadcom Raises Its Qualcomm Offer to $121 Billion

Broadcom raised its takeover bid for its rival chip maker Qualcomm to about $121 billion on Monday, piling on pressure for Qualcomm to agree to what would be the biggest-ever takeover in the technology industry.

In offering $82 a share, Broadcom is raising the stakes a month before Qualcomm’s annual shareholder meeting, at which it hopes to unseat the entire board. The bid, according to Broadcom, is its “best and final” offer.

The move by Broadcom comes at a time of consolidation in the chip making industry, and it would create a tech giant whose products would be used in nearly all of the world’s smartphones. Whether a deal actually goes ahead, however, remains an open question — Qualcomm’s leadership is fiercely opposed, while analysts have said that even if shareholders approved the deal, it could be rejected on antitrust grounds, or because the Singapore-based Broadcom would be taking over a United States company in a delicate sector.

Qualcomm’s management team and board have consistently argued that the takeover approach was opportunistic — coming during its bruising legal fight with Apple, one of its biggest customers — and priced too low.

But the revised offer may entice shareholders of the target company into demanding that its executives begin negotiations for a deal. Qualcomm reported a 96 percent drop in operating income last week, as Apple has refused to pay some licensing fees. And it is also struggling to complete its own takeover bid, for the chip maker NXP Semiconductor, amid pushback from investors of that company.

Broadcom did more than raise its offer price on Monday. It also pledged to pay a “significant” breakup fee in case a deal with Qualcomm is vetoed by government regulators, as well as pay additional cash if the two companies have not closed a transaction a year after announcement.

Both moves are meant to highlight Broadcom’s commitment to the deal.

Such assurances may prove important, given questions among analysts and investors over whether a combination of the two could win regulatory approval. There are concerns that the chip industry is increasingly concentrated in just a few hands, and a United States government committee that examines takeovers for threats to national security could also pose a roadblock.

Broadcom, meanwhile, also said that it would withdraw its offer if Qualcomm rescheduled its annual shareholder meeting from March 6, or if it paid more than the $110 a share that it has already bid for a smaller chip maker, NXP Semiconductor.

“This proposal to acquire Qualcomm is extremely compelling compared to any other alternative available to Qualcomm,” Hock Tan, Broadcom’s chief executive, wrote in a public letter to Qualcomm’s board. “We continue to hope you choose to engage with us for the benefit of your stockholders.”

The deal would mark a significant change in the chip making industry. Qualcomm is an industry giant, helping build the modern mobile phone sector with its technology. Its collection of patents is one of the most valuable assets in the world of wireless telecommunications. But more recently, it has faced a multitude of legal and shareholder challenges.

Content originally published on https://www.nytimes.com/2018/02/05/business/dealbook/broadcom-qualcomm-deal.html by MICHAEL J. de la MERCED