Broadcom puts Qualcomm on the watch – tech2.org

Broadcom puts Qualcomm on the watch



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Broadcom proposed a list of 11 directors to replace the entire Qualcomm board of directors, setting the stage for a proxy battle over the fate of its unsolicited $ 105 billion bid for the world's largest manufacturer of smart phone chips. [19659003] Credit
Mike Blake / Reuters

Broadcom has released its side plate. The chip maker is nominating 11 directors at Qualcomm, which has rejected the unsolicited offer of approximately $ 105 billion from Broadcom. Only a brave shareholder would vote to replace an entire board solely to advance an offer not yet fully committed. But the movement pressures Qualcomm to participate.

As Qualcomm points out, the Broadcom offer is not binding. Although the banks have expressed confidence in raising funds and the private equity team Silver Lake is pumping $ 5 billion, the lenders are still not really on the hook. Even if they were, the deal would still leave Hock Tan, Broadcom's acquisitive chief executive, at the helm of a company burdened with huge debts. With $ 10 of the offer price of $ 70 per share, it is also relevant to Qualcomm owners.

Broadcom promotes the ratings of its candidate list, which includes a former Nokia executive and former president of Dialog Semiconductor. For its part, Qualcomm defends its own directors, noting the independence of nine of them and the relatively recent arrival of four.

Most independent directors would probably support discussions with a suitor when, as in this case, a 28 percent premium is on the table. Qualcomm's refusal to participate – even with, according to Broadcom, "many" shareholders who wish to do so – suggests that their board thinks the timing is significantly disadvantageous.

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That's true. Qualcomm is still awaiting antitrust approvals for the acquisition of NXP Semiconductors more than a year after the $ 38 billion deal was reached. In addition, the company is waging a legal battle with Apple, among others, for royalty payments. The resolution of one or both of these uncertainties should increase investor confidence in the autonomous value of Qualcomm, which could force Broadcom to offer more, or abandon its objective.

Be that as it may, the Broadcom move marks the time to resolve Qualcomm's problems. This week is the deadline for board nominations for consideration at the company's annual meeting, scheduled for March 6. If shareholders are impatient now, they will be jumping by then.

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