For some time now, Broadcom has been trying to tempt Qualcomm with takeover bids but so far, its offers have been outrightly rebuffed because Qualcomm believes that the figures don’t add up. Most recently, Qualcomm rejected a $121 billion bid which has a cash and stock bid of $82 a share. Qualcomm stated through its Chairman, Paul Jacobs, that Broadcom’s offer of $60 in cash and $22 in Broadcom stock, doesn’t reflect Qualcomm’s potential $38 billion acquisition of NXP Technologies which only needs approval from Chinese regulators for the closing formalities of the deal. He then proposed that both companies meet at a round table to have a proper talk.
From all indications, Qualcomm is prepared to do a deal if the price is right. Now, both companies have fixed Wednesday, February 14th for the crucial talks. No one expects the meeting to be an easy one but regardless of the outcome of the talks, Broadcom will still persist for control of Qualcomm’s board as voting will take place on March 6th. In a bid to get recommendations, both firms are meeting with proxy advisory firms ISS and Glass Lewis prior to Wednesday meeting. Recommendations by these firms are quite important because it would ignite a vote either in favor or against the current Qualcomm board. If the latter nominees win, Broadcom will control Qualcomm’s board and vote in favor of the takeover bid.
Qualcomm has expressed worries that if the deal fails at the expense of government regulators after both companies must have agreed, the company will be “enormously and irreparably damaged.” Thus Qualcomm needs a breakup fee that exceeds the normal 3% – 4% of the transaction’s value. According to reports, Qualcomm has agreed to a 6% fee which is about $8 billion fee considering the current deal.