At the start of this month we started to see reports claiming that Broadcom was looking to acquire a well known company within the Android community, Qualcomm. Those reports did indeed turn out to be true because a couple of days later Broadcom officially offered to purchase Qualcomm and all of its assets for $105 billion no matter what the outcome was of the acquisition attempt of NXP Semiconductors. A week later the offer was rejected, but investors of Qualcomm are looking for Broadcom to increase its offer by about $10 per share.
When news broke about Broadcom’s attempt to acquire Qualcomm, many highlighted that this would be the largest technology deal in history. Incidentally, that title currently belongs to Broadcom themselves as they were acquired by Avago back in 2015 for $37 billion. While the $105 billion bid of Qualcomm may seem like a lot, the company and its investors feel it undervalues them and this was the reason why they declined the offer earlier this month.
Since then, Broadcom has come out and said they are still “fully committed” about the acquisition so they’re continuing to work on an offer that both sides would consider an acceptable deal. Mr. Daniel O’Keefe, a fund manager of the $3.1 billion Artisan Global Value Fund (which owns Qualcomm stock) recently spoke out about the offer and he agrees that Broadcom’s first offer undervalues them. However, that doesn’t mean they aren’t open to an acquisition. They are just looking for something they feel is fair.
The $105 billion bid from Broadcom was based on a $70 per share offer and Mr. O’Keefe feels Broadcom needs to increase that offer by $10 per share. David Rolfe, chief investment officer at Wedgewood Partners Inc., believes the offer has to at least be $80 to get the approval of the shareholders. Daniel Morgan, a vice president at Synovus Trust Co., believes than an offer between $85 and $95 per share will be enough to persuade them to sell.
Whether Broadcom is able to achieve that type of offer is unknown at this time but we expect this story to continue since the company has said they are “fully committed” about acquiring Qualcomm.