Broadcom weighs offering more stock in attempt at Qualcomm takeover

AppleInsider

Having talked with some of Qualcomm's biggest shareholders, Broadcom is allegedly considering offering more of its own stock to make an acquisition offer more palatable -- which, if successful, could radically change up Apple's legal and technological outlooks.

Sweetening the deal with extra shares would avoid Broadcom having to raise more debt and hurt its credit ratings, Reuters sources said on Wednesday. Broadcom has so far proposed buying Qualcomm for about $103 billion, a price that includes $60 per Qualcomm share and $10 per Broadcom share. That offer was rejected earlier this month, however.

The sources noted that Broadcom's board has yet to set a value for a new offer, and that representatives have yet to meet with people at Qualcomm. While Broadcom didn't approach Qualcomm prior to its first bid, it has reportedly made several rejected meeting requests since. Qualcomm's shareholders are said to be demanding at least $80 per share.

Should Qualcomm's leadership not bend, Broadcom CEO Hock Tan has expressed willingness to engage in a hostile takeover. The company is preparing to submit a slate of nominated directors for Qualcomm, and should they be voted in that could break down negotiation barriers.

Both businesses are long-time Apple suppliers -- Broadcom specializing in Wi-Fi and Bluetooth, and Qualcomm handling cellular chips. Apple and Qualcomm are currently engaged in a worldwide legal battle over patents and royalties, but that could conceivably end if the latter is bought out.

Any deal would likely face heavy scrutiny from antitrust regulators, since even a $103 billion deal would be one of the biggest acquisitions in history and give Broadcom overwhelming influence in the mobile industry.

SpamSandwich

Absolutely bizarre that Apple wouldn't make such an offer. Why are they continually letting suppliers and certain competitors walk all over them? They have more money than capable strategic business planners, evidently.

longpath

SpamSandwich said:

Absolutely bizarre that Apple wouldn't make such an offer. Why are they continually letting suppliers and certain competitors walk all over them? They have more money than capable strategic business planners, evidently.

It sounds to me like Apple is averse to acquisitions that place them in the crosshairs of regulators, and acquiring such a major parts supplier for both themselves and their competitors is an open invitation to regulatory hell from multiple countries.

SpamSandwich

longpath said:

SpamSandwich said:

Absolutely bizarre that Apple wouldn't make such an offer. Why are they continually letting suppliers and certain competitors walk all over them? They have more money than capable strategic business planners, evidently.

It sounds to me like Apple is averse to acquisitions that place them in the crosshairs of regulators, and acquiring such a major parts supplier for both themselves and their competitors is an open invitation to regulatory hell from multiple countries.

It's possible that with future Apple wireless devices they'll have a good alternative from Intel. We shall see.

gmgravytrain

It would be nice to have owned Qualcomm stock. The shares just keep climbing higher and higher simply due to that darn takeover bid. Those hedge funds can really make their investors a lot of money by constantly pumping certain stocks higher. It's just a matter of being in the right place at the right time. Qualcomm, theoretically, is worth no more than when it dropped to $50 after earnings which was right before the Broadcom bid took place. That bid made for one heck of a share jump for shareholders.

gmgravytrain

SpamSandwich said:

Absolutely bizarre that Apple wouldn't make such an offer. Why are they continually letting suppliers and certain competitors walk all over them? They have more money than capable strategic business planners, evidently.

That Apple doesn't pounce on such opportunities is a bit of an annoyance to me. Apple simply isn't an aggressive company in terms of acquisitions. Those acquisitions are what makes companies like Amazon and Alphabet so valuable to the big Wall Street investors. Those big investors are always pumped up when they think some company is going to corner a market and kill off all the competition. Because Apple doesn't actively try to corner any market, most of the big investors stay away from Apple and invest in companies willing to kill off rivals. Why is Apple scared of regulatory hell yet Broadcom isn't? Watch how much Broadcom's value jumps if they actually acquire Qualcomm. Broadcom will be praised to high heaven by Wall Street for capturing such a prize. I simply don't like how Apple is always getting criticized for not making high-profile acquisitions because that just keeps them on the doomed list. I get sick of hearing this sort of crap about Apple: https://www.cnbc.com/2017/11/22/apple-gained-nearly-285-billion-in-market-cap-in-2017-trouble-ahead.html

radarthekat

gmgravytrain said:

It would be nice to have owned Qualcomm stock. The shares just keep climbing higher and higher simply due to that darn takeover bid. Those hedge funds can really make their investors a lot of money by constantly pumping certain stocks higher. It's just a matter of being in the right place at the right time. Qualcomm, theoretically, is worth no more than when it dropped to $50 after earnings which was right before the Broadcom bid took place. That bid made for one heck of a share jump for shareholders.

It’s the old Price versus Value thing.  The market rarely prices a business at its actual value, however the latter might be determined (discounted future cash flows model used by Buffett being one of many methods).  The trick is to take advantage of the disparity between price and value.  Sometimes that means buying a stock that doesn’t adequately represent the full value of the underlying business, as many of us have done with Apple over the years.  Sometime it means buying a stock at or above fair value based upon what the business might be worth in the hands of an interested acquirer, and sometimes it means shorting a stock, or staying away.  

StrangeDays

SpamSandwich said:

Absolutely bizarre that Apple wouldn't make such an offer. Why are they continually letting suppliers and certain competitors walk all over them? They have more money than capable strategic business planners, evidently.

Wait wut? Apple should buy Qualcomm now? Why...? Merely being a supplier of modems isn’t a good reason to make qualcomm’s business Apple’s business. 

paul turner

Apple buy qcom what a fracking joke as one poster alluded to earlier there is the anti trust issue , but more importantly its incedibly hard to merge a new business into ones own. Most of them fail at it and in the case of apples structure even more so because Apple is uniquely  organized, it doesn't have “divisions” like a traditional company. It’s a circle like its new building! Merging them would be an unmitigated disaster.

jameskatt2

Here is to Broadcom doing a hostile takeover of Qualcomm.  Cheers.