Broadcom offers $103B for Qualcomm in chip megadeal

NEW YORK — Chip maker Broadcom Ltd. made an unsolicited $103 billion bid for Qualcomm Inc. on Monday, setting the stage for a takeover battle that could reshape the industry at the heart of mobile phone hardware.

Qualcomm said it would review the proposal but the San Diego-based company is inclined to reject the bid as too low and fraught with risk that regulators may reject it or take too long to approve it, people familiar with the matter told Reuters.

Broadcom Chief Executive Hock Tan, who turned a small, chipmaker into a $100-billion company based in Singapore and the United States, told Reuters he would not rule out a proxy fight to convince shareholders to replace the board and accept the offer.

“We are well advised and know what our options are, and we have not eliminated any of those options,” said Tan, who has pulled off a string of deals over the past decade. “We have a very strong desire to work with Qualcomm to reach a mutually beneficial deal.”

A combined Broadcom-Qualcomm would become the dominant supplier of chips used in the 1.5 billion or so smartphones expected to be sold around the world this year. It would raise the stakes for Intel Corp., which has been diversifying from its stronghold in computers into smartphone technology by supplying modem chips to Apple Inc.

Qualcomm shareholders, who have watched their investment sour over the past year in the face of a patent dispute with Apple, would get $60 in cash and $10 per share in Broadcom stock in a deal, according to Broadcom’s proposal. Including debt, the transaction is worth $130 billion.

“Now it’s a game of high-stakes poker for both sides,” said GBH Insight analyst Daniel Ives, who believes bullish investors were hoping for $75 to $80 per share. The offer represents a premium of 27.6 percent to Qualcomm’s closing price of $54.84 on Thursday.

Shares of Qualcomm, whose chips allow phones to connect to wireless data networks, traded above $70 as recently as December 2016 and topped $80 in 2014. They rose 1.1 percent to $62.52 on Monday, suggesting skepticism a deal would happen.

Broadcom shares rose 1.4 percent to $277.52 after touching a record of $281.80.

Any deal struck between the two companies would face intense regulatory scrutiny, especially in China, which is home to expanding rivals. Chinese ambitions to buy U.S. chipmakers have been thwarted by U.S. regulators.

Herbert Hovenkamp, who teaches antitrust at the University of Pennsylvania Law School, said that U.S. regulators would try to ensure the deal would not lead to higher chip prices.

“Based on what I’ve seen, it seems unlikely to me that there’s a basis for a challenge (to stop the deal),” he said.