Chipmaker Broadcom plans blockbuster bid for Qualcomm

Communications chipmaker Broadcom Ltd (AVGO.O) is planning to unveil a bid for smartphone chip supplier Qualcomm Inc (QCOM.O) by Monday, two sources familiar with the matter said on Friday, an attempt to create a roughly $200-billion company in what would be the biggest technology acquisition ever.

A tie-up would combine two of the largest makers of wireless communications chips for mobile phones and raises the stakes for Intel Corp (INTC.O), which has been diversifying into smartphone technology from its stronghold in computers.

The value of Broadcom’s bid has not been decided, though an offer in the range of around $70 to $80 per share is being contemplated, one of the sources said. At $70 a share, an offer would value Qualcomm at $103 billion.

Qualcomm is not aware of the details of Broadcom’s bid, and it is far from certain whether it will entertain this deal, the sources said.

“It’s a smart move that would make Broadcom into a tech juggernaut”, said GBH Insights analyst Daniel Ives.

Qualcomm declined to comment, while Broadcom did not immediately respond to a request for comment.

The bid comes as Broadcom plans to move its headquarters to the United States from Singapore, President Donald Trump said on Thursday at a White House event where Chief Executive Hock Tan cited Republican tax efforts. It is currently incorporated in Singapore and co-headquartered there and in San Jose, California.

Broadcom’s acquisition would be the most ambitious move by Tan, who has turned a small, scrappy chipmaker into a $100-billion company with a string of deals, since he took the helm a decade ago.

The proposal raises questions about whether Qualcomm will close its pending $38-billion acquisition of NXP Semiconductors NV (NXPI.O). NXP is one of the largest makers of chips for vehicles and expanding into self-driving technology.

Qualcomm, an early pioneer in mobile phone chips, supplies so-called modem chips to phone makers such as Apple, Samsung and LG that help the phones connect to wireless data networks. Broadcom is also a major supplier to many of the same companies for Wi-Fi chips.

Broadcom’s Wi-Fi chips are essentially a commodity and priced much lower than the modem chips.

The only other major supplier of high-end chips is Intel Corp (INTC.O), which supplies about half of the modem chips in Apple’s (AAPL.O) iPhones. Purchasing Qualcomm would give Broadcom a much more lucrative line of business in the mobile phone markets.

Intel shares fell 1.6 percent to $46.34.

Broadcom is considering a cash and stock offer of about $70 a share, Bloomberg reported earlier. bloom.bg/2h8pnlS

Broadcom is looking to complete its $5.5 billion purchase of Brocade Communications Systems Inc (BRCD.O) while Qualcomm is in the process of closing its deal for NXP. Shares of Qualcomm jumped 12.7 percent to $61.81, while Broadcom’s stock climbed nearly 6 percent to $273.63 on Friday afternoon. Shares of NXP fell 2 percent and Brocade slipped 2.6 percent.

Shares of Broadcom have rallied this year while Qualcomm has fallen, making the target more vulnerable.

Qualcomm faces a multinational legal battle with Apple Inc (AAPL.O) over Qualcomm’s licensing terms to Apple.

Antitrust officials, who also would have to approve a Broadcom-Qualcomm deal, are still considering Qualcomm’s purchase of NXP. Activist investor Elliott Management Corp has taken a large stake in NXP and has been pushing for Qualcomm to pay a higher price for the company, Reuters has reported.

Broadcom and Qualcomm have few areas of overlap and but both make Wi-Fi solutions for wireless routers, Bluetooth drivers and some RF semiconductors, said Rob Lineback, a research analyst at IC Insights.

“These companies are leaders in those areas but there are other companies supplying them”, said Lineback, who added that asset sales in those areas, if needed to address antitrust concerns, would not affect the value of the deal.

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