Qualcomm Warms to Broadcom Bid but Price Is Sticking Point By Ted Greenwald and Cara Lombardo Updated Feb. 26 2018 1:06 p.m. ET Qualcomm Inc. QCOM 5.75% said it believed it made progress with Broadcom Ltd. AVGO -0.69% toward negotiating a deal including steps to address regulatory concerns but that the two chip makers remain far apart on price. The cooperative shift in tone from Qualcomm came after months of holding Broadcoms hostile takeover at bay. In a letter published Monday Qualcomm said it emerged from a Friday meeting with Broadcom executivesthe second such sit-down in as many weeksbelieving the two sides made headway in negotiating what would be the largest-ever technology deal. With a week to go before a March 6 meeting where shareholders will vote on a slate of Broadcom-nominated directors Qualcomm is under pressure to show it is looking out for its shareholders by negotiating in good faith. The investor-advisory services Glass Lewis & Co. and Institutional Shareholder Services Inc. recently criticized Qualcomm management for failing to engage fully in negotiations with Broadcom recommending investors elect at least some of Broadcoms nominees. In a letter published Monday Qualcomm Chairman Paul Jacobs wrote that Broadcom previously had agreed to take steps to manage the risk that the deal wouldnt pass regulatory approvals. But he said Broadcom held fast to its most recent offer of $79 a share as its best and final proposal assuming Qualcomm acquires automotive chip specialist NXP Semiconductors NV at the latest price it offered putting the sides at odds. Even Broadcoms prior bid of $82 a share which it lowered after Qualcomm raised its own offer to acquire NXP materially undervalues Qualcomm Mr. Jacobs wrote. Qualcomm shares were up 5.3% at $66.65 in afternoon tradingthough the stock price still remains well below even the reduced $79 a share offer from Broadcom. Shares of Broadcom were down less than 1% at $252.33. Stacy Rasgon an analyst with Bernstein Research said investors worries that the deal would be stopped by regulators or that Broadcom wont raise its offer are weighing on the price. The spread is going to stay really wide he said. Broadcom reiterated in a written statement Monday its interest in genuine engagement but said it didnt believe Qualcomms revised merger agreement was intended to lead promptly to a deal. Qualcomm has only feigned engagement Broadcoms statement said. In the letter Mr. Jacobs encouraged Broadcom Chief Executive Hock Tan to agree to terms of a proposed deal notwithstanding price and sign a nondisclosure agreement so the two sides can enter into mutual due diligence and price negotiations. He said challenges to Qualcomms patent-licensing businessthe company is locked in a dispute with Apple Inc. over how much royalty revenue it pulls from smartphone salesmasks its strong performance and market leadership in our semiconductor business. He urged Broadcom to release more information about its plans for the patent-licensing business. Qualcomm issued a revised version of Broadcoms acquisition proposal that it said met its conditions for a deal on all issues other than price. While the revision doesnt include a hell or high water clausea commitment to do whatever regulators require to get a deal doneQualcomm said it maintained appropriate protections for its shareholders. In their two meetings Broadcom had agreed to some terms Qualcomm put forth in its revised proposal. Those included backing away from what Qualcomm described as Broadcoms objection to divesting itself of its own businesses to meet regulatory requirements as well as restrictions on Qualcomms licensing business while the proposed merger was being completed. The size of the breakup fee and other features of the revised merger agreement remain in contention. Broadcom has offered an $8 billion fee though Qualcomm called for 9% of the enterprise value of a deal. The second meeting between the two sides came days after Qualcomm boosted its offer to acquire the Dutch chip specialist NXP to about $44 billion a move Broadcom had warned could prompt it to end its pursuit. Broadcom responded lowering its offer for Qualcomm to about $117 billion down from more than $121 billion. Write to Ted Greenwald at Ted.Greenwald@wsj… and Cara Lombardo at cara.lombardo@wsj… Source : WSJ
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