With a potential for the biggest-ever deal in the tech sector at stake, Qualcomm shareholders will have their say on a hostile bid for the US mobile chip giant by Singapore-based rival Broadcom. Qualcomm shareholders at an annual gathering Tuesday will get to vote whether to replace six of the California company's 11 board members with candidates backed by Broadcom, essentially endorsing the deal estimated to be worth $117 billion.
Weeks of parries and thrusts, along with tactical public statements, have left the companies' boards at odds over the unsolicited offer. Qualcomm's board on Thursday sent a letter to shareholders urging them to re-elect its current members, making a statement against Broadcom's offer. "The Qualcomm board believes it is not in the best interest of Qualcomm's stockholders to elect Broadcom's nominees," the directors said. Qualcomm, which is the dominant maker of microprocessors for smartphones, says it has a bright future on its own, especially ahead of a transition to fifth-generation (5G) wireless communications networks.
The Qualcomm board has also expressed concern that any deal with Broadcom could be delayed or blocked by antitrust regulators around the world. Broadcom meanwhile fired off a letter of its own, urging Qualcomm shareholders to elect all six of its nominees to the board, sending "a clear signal" supporting the takeover bid which would provide a handsome gain to shareholders of the US firm. The hostile offer "provides greater value and certainty to Qualcomm stockholders, with less risk, than any other available alternative," Broadcom said in its appeal to shareholders.
Broadcom made its first offer in November, and subsequently raised it to $121 billion but then lowered it, arguing that Qualcomm had effectively agreed to "transfer" value by raising its takeover offer for Dutch-based tech firm NXP. The Broadcom offer "undervalues" the US firm, Qualcomm has said, while opening the door to talks if Broadcom boosts its price. Qualcomm chairman Paul Jacobs said the company is willing to sign a non-disclosure agreement that would allow Broadcom to view confidential business information from its US rival, suggesting this would enable Broadcom to get a better picture of Qualcomm's true value.
Any tie-up of the two giants could reshape the fast-evolving sector of chips for smartphones and connected devices. But it would have to pass regulatory muster in several countries. Qualcomm has cited "regulatory risk" as a factor in rebuffing the Broadcom bid but has also said the offer "undervalues" Qualcomm in view of its prospects in mobile technology.
Broadcom has accused Qualcomm's of "engagement theater" designed to ease pressure at the US firm's annual shareholder meeting March 6. "Rather than acting as true fiduciaries with a responsibility to act in the best interests of Qualcomm's stockholders, the Qualcomm board has done nothing more than feign engagement with Broadcom," the Singapore-based company said in its letter.
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