Will QUALCOMM, Inc. (NASDAQ:QCOM) Accept Broadcom’s Takeover Bid?

November 07, 2017, 13:59 pm ET, BY Simon M.- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

On Monday, Broadcom Ltd (NASDAQ:AVGO) announced an unsolicited bid for QUALCOMM, Inc. (NASDAQ:QCOM) valued at $103 billion. Qualcomm responded by stating that it would review the bid in order to determine whether to accept or decline the offer.

Article Summary

Broadcom Ltd recently announced a $103 billion bid to acquire Qualcomm.

Qualcomm is yet to deliberate on the bid, but Broadcom is open to a hostile takeover.

Opinion is divided on the benefits and drawbacks of the acquisition.

Here’s the trading report on QCOM.

According to Reuters, sources familiar with the issue believe that Qualcomm is inclined to decline the offer based on the regulatory challenges that the two companies may face in order to get approval for the acquisition.

Some of the factors favoring the success of the deal include the fact that the two companies could achieve product synergies given that they both manufacture mobile chipsets. The two companies are quite compatible given that Qualcomm mainly produces chips for mobile data networks, while Broadcom mainly produces Wi-Fi and Bluetooth chips.

The fact that Qualcomm shareholders have witnessed the company’s stock price being eroded by the ongoing patent dispute between QCOM and Apple Inc. (NASDAQ:AAPL) could also favor the deal’s approval by shareholders. The takeover bid from Broadcom could be exactly what the company needs in order to restore shareholder value.

However, some analysts believe that Broadcom does not have the financial capacity to acquire Qualcomm and that the acquisition might generate negative returns for Broadcom shareholders. This group of analysts believe that Broadcom has been on an acquisition spree in the last few years and is taking on massive debt, which it might have trouble servicing in future.

The combined company would become the third-largest chipset manufactured behind Intel Corporation (NASDAQ:INTC), which leads the market, Samsung Electronics, which is second in terms of market share.

Broadcom will also benefit from Qualcomm’s acquisition of NXP Semiconductors NV (NASDAQ:NXPI), a deal which is pending approval from European regulators. Therefore, Broadcom would be acquiring two companies if its bid is successful and the NXPI acquisition is approved.

The Qualcomm board is yet to deliberate on the takeover bid, but the Broadcom CEO, Hock Tan has stated that he is willing to do a hostile takeover through a proxy fight to replace the board if his initial offer is rejected.

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