Broadcom Ltd. plans to raise its bid for Qualcomm Inc. to around $120 billion, according to a person with knowledge of the matter, trying to force its target to come to the table in what would be the largest-ever technology deal.
The chipmaker is considering lifting its offer to about $80 to $82 per Qualcomm share, the person said, asking not to be identified because the information is private. Qualcomm Chief Executive Officer Steve Mollenkopf had dismissed Broadcom’s earlier proposal of $70 per share as not being worth consideration. Broadcom plans to announce the new bid Monday morning U.S. time, the person said.
Broadcom Chief Executive Officer Hock Tan is putting pressure back on Mollenkopf and his board, who have so far refused to negotiate. By sweetening the offer, he’s also improving prospects for his nominations to Qualcomm’s board in a shareholder vote next month. A victory in that effort would void the current opposition.
The situation is fluid, and the exact level of the new bid hasn’t been finalized, the person said. Representatives for Broadcom and Qualcomm declined to comment. Reuters reported the plans for an increased bid earlier, citing unidentified people.
Broadcom’s hostile bid for the larger San Diego-based company is the latest and most audacious move by Tan in a string of deals that have made his company one of the world’s largest suppliers of semiconductors. He wants Qualcomm for its leading smartphone modem chip division, an example of what he calls a “franchise” that will continue to dominate.
Qualcomm has countered that its future is much brighter as a standalone company. It said it’s on the cusp of breaking into new markets for products such as servers, personal computers and autos, putting it on a path to becoming a much bigger company.
That argument has been hurt by attacks on its licensing business. Regulators around the world are fining or investigating Qualcomm, supporting elements of Apple Inc.’s claims in a lawsuit against the company that it abuses its dominant position. Qualcomm has countered that it expects to win in court over time.
The fate of Qualcomm’s licensing business is key to its future. The company is unique in the chip industry because most of its profit comes from charging fees on patents that cover the fundamentals of all modern phone systems. That cash influx fuels industry leading research and design that in turn helps its chip unit build products that dominate the smartphone industry.
Investors will have to choose whether they want to take the money from Broadcom now or sit tight and hope for a favorable resolution of its legal entanglements and for the promised new market growth to kick in.
Before reports of Broadcom’s $70-a-share offer in November, Qualcomm’s stock had been trading at less than $55, partly because of worries its earnings would continue to be hurt by customers such as Apple refusing to pay. Investors contacted by Bloomberg at the time of the initial bid said they would need more than $80 a share to be persuaded to side with Broadcom.