With $ 70 per share, the total amount for the acquisition came out to be130 billion USD. Broadcom officially proposed the acquisition of mobile communications leader Qualcomm at a price of $ 70 a share ($ 60 in cash and $ 10 in stock). There is currently no official response from Qualcomm to Broadcom’s proposal.
Completion of the acquisition of Broadcom and Qualcomm will prompt Broadcom to become the third-largest chipmaker behind Intel and Samsung in the acquisition of Silver Lake Partners to provide a $ 5 billion convertible debt financing letter to Broadcom. If the merger is really accepted by Qualcomm’s board of directors, it would exceed the $ 67 billion of EMC’s acquisition in 2015, making it the largest M & A deal in the tech world. The last time Silver Lake Partners appeared in the eyes of the average reader was in a Dell privatization case.
The following is a full-text letter from Hock Tan, Chairman and CEO of Broadcom:
Dear Members of the Board of Directors:
On behalf of Broadcom, I am pleased to submit this proposal to acquire Qualcomm in a transaction that will provide Qualcomm stockholders with an immediate, substantial and compelling premium to the value that would be achievable by Qualcomm on a standalone basis, as well as the opportunity to participate in the upside potential of the combined company.
As you know from prior discussions between our two companies, Broadcom has been interested for some time in combining Qualcomm’s mobile business with the Broadcom platform. We continue to believe that such a combination will deliver substantial benefits to my pressing stockholders, employees, customers and other We are hopeful that you will agree that the proposal we outline in this letter presents a compelling opportunity for Qualcomm stockholders to realize both present and future value for their Qualcomm shares.
We have great respect for the legacy Qualcomm has built since its founding more than 30 years ago by Irwin Jacobs, Andrew Viterbi and their colleagues. Based on our knowledge of the semiconductor industry, we believe that there is a significant strategic, financial and operational rationale for the proposed transaction. A combination of Qualcomm and Broadcom will create a strong, global company with an impressive portfolio of industry-leading technologies and products. Given the highly complementary nature of our businesses, we are confident that our global customers will embrace the proposed combination as we work strategically with them to deliver more advanced value-added semiconductor solutions.
Since I discussed a combination with Steve in August of last year, Broadcom has successfully completed the integration of the Broadcom-Avago combination, de-levered its balance sheet and meaningfully increased revenues and profitability. As a result, Broadcom stockholders have been rewarded with a 55% appreciation in Broadcom’s stock price since that time, ranking in the top 10% among the S & P 500 over that period. We believe these factors, coupled with our history of successful acquisitions and integrations, clearly demonstrate our commitment and ability to implement value- enhancing transactions and deliver robust results for stockholders, employees, customers and other stakeholders
Consisting of $ 60.00 per share in cash and $ 10.00 per share in Broadcom shares. This represents a significant premium of 28% to the closing price of Qualcomm common stock on November 2, 2017, the last unaffected trading day prior to media speculation regarding a potential transaction, and a premium of 33% to Qualcomm’s unaffected 30-day volume-weighted average price. Our proposal sites whether your pending acquisition of NXP is consummated on the go-ahead terms of $ 110 per share or that transaction is terminated.
Our proposal will enable Qualcomm stockholders to achieve both immediate cash value and the ability to participate in the future success of the combined enterprise, which will benefit from greater scale and broader product diversification. The combination of our two companies and associated synergies will be accretive to We have significant experience with acquiring equity and equity in the combined company and an established track record of delivering financial results for our stockholders. I am confident that we can deliver similar results for our combined stockholders should we consummate this transaction.
The proposed transaction will not be subject to any financing condition. BofA Merrill Lynch, Citi, Deutsche Bank, JP Morgan and Morgan Stanley have advised us in writing that they are highly confident that they will be able to arrange the necessary debt financing for the proposed transaction. Silver Lake Partners, which has served as a strategic partner to Broadcom in prior transactions, has provided Broadcom with a commitment letter for a $ 5 billion convertible debt financing in connection with the transaction. We also expect to maintain our investment grade credit rating the proposed transaction. We and our advisors are available to review our financing plans with you at your convenience.
We and our advisors have conducted extensive analysis of the regulatory approvals that will be required in connection with the proposed transaction, and we are confident that the transaction will receive all necessary approvals in a timely manner. We would not make this offer if we were not confident that our common global customers would embrace the proposed combination, and we do not anticipate any material antitrust or other regulatory issues that would extend the normal timetable for closing a transaction of this nature.
We have a long history of providing leadership for growth and for employment, including business unit leaders, of companies we acquire. Employees who have joined our company as a result of acquisitions have become an integral part of our business, and we look forward to the opportunity to welcome Qualcomm’s employees to Broadcom.
We believe that our proposal represents the most attractive, value-enhancing alternative available to Qualcomm stockholders, and that it is in the best interests of both parties to proceed as soon as possible to reach agreement on a transaction structure and terms. We are ready to devote all necessary resources to finalize all documentation on an expeditious basis. We and our advisors are prepared to engage in discussions immediately to work toward a mutually beneficial transaction.
We look forward to working with you to complete this transaction successfully and suggest that that that we financial and legal advisors and senior management team meet at your earliest convenience to work toward this goal.
This letter does not constitute a binding obligation or commitment of either company to proceed with any transaction. No such obligations will in any event be imposed on either party unless and until a mutually acceptable definitive agreement is formally entered into by both parties.
/ s / Hock Tan
President and Chief Executive Officer
Qualcomm was founded by Irwin Jacobs and Andrew Viterbi in 1985 and is headquartered in San Diego, California; Broadcom was founded in 1991 with founders Henry Nicholas and Henry Samueli.