Broadcom on Tuesday rethought its attempted coup of Qualcomm's board of directors, having eliminated five of its eleven proposed directorial nominees ahead of the San Diego, California-based firm's annual shareholder meeting scheduled for March 6. According to the revised move, the unsolicited suitor is seeking to replace six Qualcomm's directors, enough to ensure a majority vote that would greenlight the proposed merger. Leaving five of Qualcomm's existing directors on the company's board should also ensure its "continuity," the bidder said. The semiconductor giant said electing its nominees is the only way for Qualcomm's investors to be certain they can benefit from the company's "best and final" offer for the chipmaker which the existing board already refused, claiming it still undervalues its assets and comes with major and possibly insurmountable regulatory scrutiny.
Broadcom is proposing by far the largest tie-up in the history of the tech industry, having offered $121 billion for Qualcomm, or $60 in cash and a $22 equity payment for every Qualcomm share. Should Broadcom's nominees lose the election or the annual stockholder meeting is delayed, the offer will be withdrawn, the suitor reiterated. The only other alternative is for the existing board to come to a definitive merger agreement with Broadcom but given its reluctance to even agree to enter talks on the matter, that scenario remains highly unlikely. The two entities spent the last several days discussing the situation with independent advisory agencies in hopes of having them back their directorial nominees and will only meet face-to-face tomorrow when Broadcom Chief Executive Officer Hock E. Tan is expected to be grilled by Qualcomm's management.
Qualcomm remains adamant that Broadcom isn't capable of completing the merger within 12 months like it's promising, whereas the Singapore-based tech giant is claiming it's prepared to part with additional compensation in such a scenario and even suggested that an unprecedentedly high break fee would be part of the deal should the consolidation be unconditionally blocked by any antitrust regulator. Qualcomm is dismissive of such promises as it's currently struggling to conclude its much smaller acquisition of Dutch NXP Semiconductors which it originally agreed in late 2016 yet is still without a regulatory approval from China, with the fate of its $38 billion bid remaining uncertain. If Broadcom eventually manages to acquire Qualcomm, it would likely streamline its operations in an aggressive manner and focus on the company's mobile chip and connectivity businesses, as suggested by Mr. Tan's track record with M&As.