Any merger deal would need to pass muster with Qualcomm shareholders and could face regulatory scrutiny in the United States and other markets.
Qualcomm has announced that its board of directors has unanimously rejected the unsolicited proposal announced by Broadcom Limited ("Broadcom") on November 6, 2017, saying the bid "significantly uvervalues" the chip firm's value.
Assuming this is true, things could get pretty messy as Broadcom's CEO Hock Tan had previously stated that he is open to a takeover battle.
Broadcom said it would seek to engage with Qualcomm's board and management.
Tan said he's pleased with the reaction he's already received from Qualcomm shareholders and customers regarding his proposal and would prefer to keep the negotiations friendly. "We continue to believe our proposal represents the most attractive, value-enhancing alternative available to Qualcomm stockholders and we are encouraged by their reaction". The deal would dwarf Dell Inc.'s $67 billion acquisition of EMC in 2015 - then the biggest in the technology industry.
The combined business would instantly become the default provider of a set of components needed to build each of the more than 1 billion smartphones sold every year.
Sorry Broadcom, but it doth butter no parsnips says Qualcomm. "We would not make this offer if we were not confident that our common global customers would embrace the proposed combination".
"Qualcomm shareholders are likely to hold out for more, but we believe something in the US$80-ish range is likely enough to bring majority around", Sanford C. Bernstein analyst Stacy Rasgon wrote in a note published at the weekend. Tan said his offer for Qualcomm stands with or without Qualcomm's acquisition of NXP.
"After a comprehensive review, conducted in consultation with our financial and legal advisers, the board has concluded that Broadcom's proposal dramatically undervalues Qualcomm and comes with significant regulatory uncertainty", Qualcomm presiding director Tom Horton said in the statement. Nevertheless, all signs are pointing up for Qualcomm, given the potential for a higher bid from Broadcom.
Broadcom has also been deliberating the possibility of raising its bid for Qualcomm, including through more debt financing, some of the sources said, although it was not clear when Broadcom would choose to make such a move.