Another Monster Semiconductor Acquisition: Broadcom Bids for Qualcomm

In what would be the largest acquisition in the technology industry to date, Broadcom made a bid for Qualcomm today at $70 per share which would be a $130 billion deal. It would make Broadcom the 3rd largest semiconductor company behind Intel and Samsung. The offer represents a 28 percent premium over the closing price of Qualcomm’s stock on November 2 and would be a combination of cash and stock ($60 in cash and $10.00 per share in Broadcom shares).

Hock Tan, President and Chief Executive Officer of Broadcom, stated that "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."

With Broadcom already strong in the WiFi and Bluetooth area (along with other RF products from Avago), this appears to be a chance for them to acquire significant market share in mobile products to participate in the 4G/LTE and 5G growth. Broadcom will do the deal with or without the NXP acquisition, but either way, will have significant RF/microwave products that affect our industry.  Since the NXP acquisition has hit some snags, I think they might just abandon it since this transaction is so much more significant.

Some interesting recent developments that relate to this takeover include Qualcomm’s legal battles with Apple over patents while Broadcom seems to have a good relationship with Apple, so it will be interesting to see if this can be worked out. Also, Broadcom just announced with Donald Trump that it would move its home base to Delaware (the company has joint headquarters in San Diego, California and Singapore) so seems to be positioning itself for this acquisition. The combined company would have significant market share in wireless products so could affect the price of modems, WiFi chips and others, so there might be trouble getting it approved by US regulators. With all of this going on, it will probably take some time for this to happen if it goes through.

I keep thinking that the semiconductor consolidation will stop soon, but it seems to just keep going and going. I wonder if Intel will respond in any way since they are working on wireless products but do not have a significant footprint in the market yet. The 5G and IoT markets are too large for these companies to not participate on the wireless side so expect more to come...