Broadcom proposed to acquire Qualcomm in a deal worth $130 billion, which would be the biggest tech acquisition ever if it pushes through.
There were reports over the weekend that Broadcom was considering to make a bid of more than $100 billion to buy Qualcomm, sending the chipmaker's stocks soaring. The offer is now official, but will Qualcomm really benefit from a takeover?
Broadcom Offers $130 Billion For Qualcomm
Broadcom announced through a press release its $130 billion proposal to acquire Qualcomm. It would be the largest tech acquisition in history, taking over the throne from Dell's $67 billion purchase of EMC in 2015.
The transaction includes $70.00 per Qualcomm share, broken down into $60.00 in cash and $10.00 in Broadcom shares, for a total of about $105 billion. On a pro forma basis, the offer's value goes up to $130 billion as it includes the payment of $25 billion of net debt.
If the acquisition pushes through, it would make Broadcom the third-biggest chipmaker in the world, behind Intel and Samsung.
Moment Of Weakness For Qualcomm
Qualcomm is preparing to rebuff the offer, with the argument that it undervalues the company despite the per-share price on a 25 percent premium. However, the chipmaker is currently struggling in a rare moment of weakness due to its ongoing legal battle with Apple.
The legal battle between Qualcomm and Apple, centered on Apple's claims that Qualcomm is charging too much for its chips, recently entered a new chapter. The chipmaker filed a new lawsuit against the iPhone company for allegedly giving rival Intel access to chip technology owned by Qualcomm. The dispute has gotten so bad that Qualcomm even filed a lawsuit last month to stop Apple from selling its iPhones in China.
The pressure is now largely on Qualcomm, as Apple is reportedly planning to stop using Qualcomm components in future iPhones and iPads. If this pushes through, it will be a big blow for Qualcomm, as 20 percent of its sales last year, or $3.2 billion, was to Apple.
Will Qualcomm Benefit From The Takeover?
It is believed that Broadcom, if it is able to acquire Qualcomm, will help smoothen the issue between the chipmaker and Apple.
However, things might not go well for Qualcomm if the takeover proceeds. Tech analyst Patrick Moorhead tweeted that Broadcom would "slice, dice, destroy" Qualcomm. This would end the chipmaker's run as major source of innovation in the industry.
As PC Magazine's Sascha Segan wrote, Qualcomm may find a way to settle its dispute with Apple and focus on 5G technology, or it could succumb to a takeover by Broadcom and be bogged down by cost-cutting measures that will likely come its way.