Broadcom offered Qualcomm investors $70 per share, or roughly $130 billion, for their stakes in the company. That's a 28% premium over Qualcomm's share price on November 2—the day before reports of Broadcom's interest in acquiring the company raised the price—and is 33% higher than 30-day volume-weighted average share price. Qualcomm said it received and will consider the "non-binding, unsolicited proposal."
In a press release, Broadcom said it wants to acquire Qualcomm because doing so would "position the combined company as a global communications leader with an impressive portfolio of technologies and products." Qualcomm's near-ubiquity in the mobile market appears to be of particular interest; Broadcom apparently wants to sell the chips that power everything from Internet of Things (IoT) devices to smartphones.
Broadcom president and CEO Hock Tan said:
"This complementary transaction will position the combined company as a global communications leader with an impressive portfolio of technologies and products. We would not make this offer if we were not confident that our common global customers would embrace the proposed combination. With greater scale and broader product diversification, the combined company will be positioned to deliver more advanced semiconductor solutions for our global customers and drive enhanced stockholder value."
There's likely another reason for Broadcom's offer: It smelled blood in the water. Qualcomm's business practices have come under increasing scrutiny in recent months, with the likes of Apple and Intel accusing it of being anti-competitive. The Federal Trade Commission (FTC) also launched an investigation after it said Qualcomm used its clout to force companies into "onerous and anticompetitive supply and licensing terms."
The fight with Apple has been particularly noteworthy. Both companies have gone back and forth with lawsuits and counter-suits and tattling about each other to regulators. Apple's filed $1 billion and 1 billion yuan lawsuits in the U.S. and China, respectively, and is thought to have inspired the FTC's investigation. Qualcomm also accused the company of telling manufacturers to break their contracts and of damaging its profits.
Apple isn't the only one going after its opponent's wallet. In July, Qualcomm asked regulators to halt the import and sale of iPhones that don't use its baseband processors, and that complaint led the International Trade Commission (ITC) to say in August that it would investigate allegations that Apple infringed on Qualcomm patents. It's clear that neither Apple nor Qualcomm plan to let the other emerge from this dispute unscathed.
Combine the fear a fight with Apple could inspire in Qualcomm shareholders with the company's recent advancements in VR, a renewed attempt to make Windows 10 on ARM work, and the stranglehold it has on the mobile market, and it's no wonder Broadcom thinks now is the time to make a bid for the company. Qualcomm seems keen on remaining independent, however, with the company saying in a press release:
The Qualcomm Board of Directors, in consultation with its financial and legal advisors, will assess the proposal in order to pursue the course of action that is in the best interests of Qualcomm shareholders. Qualcomm will have no further comment until its Board of Directors has completed its review.