Broadcom is planning an unsolicited takeover approach to rival chip maker Qualcomm, a bid that could be worth $100bn but also faces steep odds of success reports Dow Jones.
News of the potential bid surfaced just a day after Singapore-based Broadcom announced plans to bring its headquarters back to the US, with Hock Tan heralding the move in a news conference at the White House with President Donald Trump. Broadcom cited the potential for lower US corporate rates, though investors expressed uncertainty about what it might mean for the company's tax bill.
Qualcomm’s share price rose +3.54% to $64 in pre-market trading on Monday. Broadcom may launch its bid for Qualcomm this weekend, according to a person familiar with the matter. It is likely to be made up mainly of cash, with 10% or 20% in stock, the person said.
It isn't clear how much Broadcom would offer for Qualcomm, which currently has a market value of roughly $90bn. There is no guarantee an approach will be made or that Qualcomm would be receptive. It is even less certain that there ultimately would be such a deal given potential regulatory and other hurdles.
Market leading smartphone technology
Qualcomm is the market leader in chips that manage wireless communications in smartphones. It supplies chips for a portion of Apple Inc.'s iPhones and its gear is at the heart of many high-end Android phones.
Qualcomm also owns patents on technology essential to implementing cellular-communications standards, which allows it to collect a royalty on nearly every smartphone sold world-wide. And it is a front-runner in the emerging fifth-generation cellular standard known as 5G.
Broadcom sells a diverse line of equipment for networking and communications - including technology for smartphones from Apple and Samsung Electronics Co. - as well as data storage, electronic displays and set-top boxes.
Sector undergoing dealmaking wave
Broadcom under Tan has pursued a string of acquisitions and its move to purchase Qualcomm reflect a broad wave of consolidation in the semiconductor industry in recent years and has driven Qualcomm's own $39bn proposed deal for NXP Semiconductors NV.
The companies are still seeking regulatory approval for that deal. In another sign of the deal-making push, Marvell Technology Group Ltd. is in advanced talks to combine with Cavium Inc., The Wall Street Journal reported Friday, a deal that would create a chip maker worth some $14bn.