NXP had a great year with a significant increase in business and it was only fair to offer more to seal the deal. Broadcom doesn’t like that and therefore lowered its offer for Qualcomm. Tom Horton, director of Qualcomm’s board, commented that $82 "just not even close to what the value of the company is". You can imagine how the Board of Directors at Qualcomm would react at an even lower offer.
The CEO of Broadcom was vocally against the NXP acquisition and after the recent development Broadcom is offering $57 in cash and $22 in Broadcom shares. This is actually less in cash than what the stock is trading at right now. It was $63.99 when the market closed and down after market.
Broadcom desperately needs Qualcomm
Broadcom also confirmed that it is willing to offer the $8 billion regulatory reverse termination fee if the merger doesn’t go through. Fudzilla pointed out that the NXP acquisition is significantly smaller compared to a proposed Broadcom acquisition of Qualcomm. The NXP takeover has taken sixteen months and still pending in one market, China.
Broadcom also wants to offer a six percent per annum (net of dividends) fee accruing from and after the 12-month anniversary of the date of the merger agreement. The company is not saying that if Broadcom fails to make the money in that year, Qualcomm shareholders would not get anything. This is still a way to sweeten the deal. But analyst Patrick Moorhead, the founder of Moor Insights, made an interesting comment about Broadcom – Qualcomm acquisition. Patrick pointed out that they are like oil and water.
If the NXP Qualcomm deal has already taken 16 month, with some end in sight, it is likely to assume that a Broadcom-Qualcomm entity would be too big to approve. The joint company would have too large a share in some markets including Wi-Fi and the Chinese top six vendors said that they are not big fans of the merger too. Broadcom would gain a great 5G NR, automotive, edge computing, IoT, PC / AI/ ML compute assets and would probably get more business from Apple too.
5G NR, Artificial Intelligence or Edge compute strategy
Broadcom has a lot to gain as it doesn't have a 5G NR, Artificial Intelligence or Edge compute strategy and Fudzilla believes that these three things will create the winners and losers in the years to come.
So Qualcomm could lose a lot of business in China and most other places including USA and China due to the uncertainty. It is hard to imagine that a Broadcom/Qualcomm entity would be successful as it would take probably at least 18+ months for regulatory bodies to approve. It is unlikely that it would ever be approved and that both companies’ shares could go down the toilet in the meantime.
The most important date remains the March 6, when Qualcomm shareholders are voting for its board of directors, and Broadcom wants to insert six of its people. Broadcom obviously doesn’t want to stop and it plans to continue going after Qualcomm, but lowering the offer might be a very bad move even for greedy investors and stock owners.