Broadcom Makes 'Inadequate Offer' Even Worse, Says Qualcomm

Qualcomm has now made it clear that Broadcom’s revised bid is not only below what the company values itself at, but has actually “made an inadequate offer” to begin with “even worse.” Suggesting that the new offer significantly undervalues the business even more so than the original bid had. This follows on from the news earlier today that Broadcom had revised its bid by reducing the amount offered, explaining how this was a reaction to the increase in price (from $110 per share to $127.50) offered by Qualcomm for NXP Semiconductors. In other words, by Qualcomm offering NXP more, Broadcom decided to offer Qualcomm less to account for what it sees as the perceived difference in value.

Broadcom had previously stated that it intends to acquire Qualcomm irrespective of whether the NXP deal goes through and also did reiterate today it is “fully committed” to the acquisition while also adding it remains willing to pay a higher amount if the NXP deal fails to complete - the difference essentially equating to $3 per share based on a combined ‘cash and stock’ offer. Although the latter point is likely to be more of a vacant statement as in spite of the recent change in price, Qualcomm is obligated to complete the NXP acquisition. In fact, Qualcomm's latest announcement makes it clear its contractual obligations is part of the reason why the NXP amount had to be increased in the first place, citing the deal would not have been able to complete at the previously-announced price.

Following on from that point, Qualcomm’s latest statement also highly implies this latest move by Broadcom its a strategic one. As in spite of Qualcomm upping its per share bid for NXP, the increase in numerical value does not automatically equate to an additional cost. For example, and besides once again drawing on the value associated with acquiring NXP in general - including the opportunity for “greater scale in higher growth end markets” such as IoT and connected cars - Qualcomm explains that since the original offer (to NXP) was made the operating income of the company (NXP) has increased by 20-percent. Therefore, Qualcomm is not simply paying more for NXP shares, but instead is paying in line with their current value. With Qualcomm summing up its revised NXP offer by stating the company “is more valuable with NXP than without” - points which Qualcomm states “Broadcom is well aware.” Qualcomm also took the opportunity to confirm Broadcom has not only “refused” to negotiate on price in the past, but is still doing so.

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