Qualcomm responds to Broadcom's tactics

Reuters

Reuters

Broadcom Ltd. said it notified Qualcomm Inc. that it plans to nominate 11 individuals for election to Qualcomm's board of directors at the annual meeting, which now consists of 11 directors.

Qualcomm responded to the offer today by saying Broadcom's action was "a blatant attempt to seize control of the Qualcomm Board in order to advance Broadcom's acquisition agenda". These nominees are inherently conflicted given Broadcom's desire to acquire Qualcomm in a manner that dramatically undervalues Qualcomm to Broadcom's benefit. GSA Capital Partners LLP now owns 17,928 shares of the semiconductor manufacturer's stock worth $4,348,000 after purchasing an additional 961 shares in the last quarter.

X Analysts expect Broadcom to earn $4.50 a share, up 30% year over year, on sales of $4.82 billion, up 16%, in the October quarter, according to Zacks Investment Research. Moreover, the company stated that it would support expanding the 11-person board to make room for three current directors if the replacement proposal is accepted. Broadcom said the proxy battle comes after Qualcomm has "ignored" repeated attempts to discuss its buyout bid, which would value Qualcomm at almost $105 billion, and was rejected by Qualcomm last month.

Tan said Broadcom had received "positive feedback from customers" about the proposed merger and was confident that regulatory requirements could be made.

The slate will be heavily scrutinized, because the nominees will not just be asked to put Qualcomm up for sale, but will have to oversee the company until a deal with Broadcom closes.

After consulting with its financial advisors and legal counsel, Qualcomm said not only does the offer misrepresent the company's worth, but also claimed it presents "significant regulatory uncertainty".

Qualcomm provides chips to carrier networks to deliver broadband and mobile data, and is now working on chips for mobile and transition to 5G networks. Qualcomm stockholders are poised to participate in substantial growth and value creation as the Company continues to execute its strategy across its businesses. This does, however, leave the door open for Broadcom to come in with a better offer that Qualcomm may consider, but that's quite a ways away.

If Broadcom decides to raise its bid before March, it could help the company win over Qualcomm's stockholders very quickly. If it does sell to Broadcom, it means the combined businesses' chips will be present in more than a billion smartphones sold every year.

Broadcom Chief Executive Hock Tan [pictured above] said Qualcomm's shareholders want the two companies to talk about the acquisition proposal, but so far Qualcomm has ignored Tan's attempts to begin a dialogue. However, according to sources it's likely to reject the offer according to sources, as it doesn't feel it's representative of the value of the company or the people in it.

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