Broadcom offers $103 billion to acquire Qualcomm

This is massive news. Broadcom is an American semiconductor company that makes products for wireless and broadband industry. Their products make wireless networks tick. Qualcomm, another American MNC is into semiconductor products (like chips that power smartphones and tablets) and telecommunication equipment. Broadcom has officially offered to acquire Qualcomm for 70$ per share ($103 billion in cash and stock) and if this goes through, it would be biggest technology acquisition ever. Banking and financial giants BofA Merrill Lynch, Citi, Deutsche Bank, JP Morgan and Morgan Stanley are confident to arrange necessary financing for the transaction to go through.

This could be a make or break deal for Broadcom. If this deal turns out to be a success, they would have massive control over smartphone and tablet chips, GSM/CDMA network equipment, secure communication devices, home network devices, DSL devices, STBs, satellite TV equipment, satellite phones etc. This will also increase their patent portfolio and give them massive leverage over companies with which they are fighting patent and legal battles.

Broadcom is offering 27.6% extra over Qualcomm’s share closing price of $54.84 (Thursday closing price) and this can be extremely tempting for Qualcomm’s shareholders. The shareholders will get 60$ in cash and $10 per share in Broadcom shares. With debt included, Broadcom’s bid can be rounded off at $130 billion.

“In our view, $70 per share wouldn’t be sufficient,” Nomura Instinet analyst Romit Shah wrote in a client note.