Broadcom Explores Deal to Buy Chipmaker Qualcomm

Cash-and-stock bid of about $70 per share expected in days
Broadcom offer would be biggest-ever takeover of a chipmaker
Broadcom Ltd. is considering a bid of more than $100 billion for Qualcomm Inc., according to people familiar with the matter, in what would be the biggest-ever takeover of a chipmaker.

Broadcom is speaking to advisers about the potential deal, said the people, who asked not to be identified because talks are private. The offer of about $70 a share would include cash and stock and is likely to be made in the coming days, the people said. A final decision on whether to proceed has not been made, they said.

Qualcomm shares rose as much as 19 percent in New York in their biggest intraday move since October 2008, after Bloomberg News first reported the takeover plans. They closed up 13 percent at $61.81, valuing the company at $91 billion. Broadcom rose 5.5 percent, for a market valuation of about $112 billion.

Representatives for Broadcom and Qualcomm declined to comment.

Broadcom Chief Executive Officer Hock Tan is a voracious acquirer, and he’s played a key role in a wave of consolidation engulfing the $300 billion semiconductor industry over the last three years. Broadcom, created in 2016 when Avago Technologies Ltd. acquired Broadcom Corp. for $37 billion, has built itself from a former Hewlett Packard division into one of the largest chipmakers via a string of purchases. Tan has said he wants more deals, a strategy that could be limited by opposition from U.S. regulators.

Gadfly: Broadcom Embraces U.S. Citizenship With Qualcomm Pursuit

Broadcom, a major supplier of iPhone parts that counts Apple among its largest customers, said this week it will return its headquarters to the U.S. from Singapore. The company already lists San Jose, California, as a corporate co-headquarters.

Qualcomm finds itself in a weakened state. A legal battle with Apple is costing revenue and jeopardizing a business model that for years made Qualcomm one of the most successful chipmakers. Before today, its shares had slumped 16 percent this year, compared with a 41 percent surge in the Philadelphia Semiconductor Index.

A change of management at Qualcomm might help resolve the dispute with Apple more quickly, and thereby make Qualcomm’s licensing and chip businesses more valuable, according to Sanford C. Bernstein & Co. analyst Stacy Rasgon. Earlier this week, Qualcomm executives said the legal process would "proceed under the court’s schedule,” indicating no resolution soon.

“Maybe they have a better relationship with Apple, maybe they settle,” Rasgon said.

At issue between Qualcomm and Apple are licensing fees the chipmaker charges for patents that cover the basics of how mobile phone systems work. Apple contends Qualcomm is unfairly charging too much and illegally taking advantage of its market position in chips. Qualcomm has countered that Apple, one of its largest customers, has lied to regulators in an unfair attempt to bully its opponent into charging less.

Qualcomm, based in San Diego, is also confronting headwinds in closing its $47 billion purchase of NXP Semiconductors NV. The deal is facing regulatory scrutiny in Europe and opposition from some shareholders including activist hedge fund firm Elliott Management Corp., which has argued the offer undervalues NXP.

Aside from the financial challenges of such a large deal, Broadcom may also encounter close regulatory scrutiny. Based on 2016 revenue, the enlarged company would be the world’s third-largest chipmaker behind Intel Corp. and Samsung Electronics Co. That would give it control of a big part of the supply chain of vital phone components such as Wi-Fi and cellular modem chips. The two companies are already among the top 10 providers of chips in an industry that’s consolidating rapidly.

— With assistance by Matthew Campbell