Chip maker Broadcom has made an unsolicited offer to buy its rival Qualcomm for $105 billion. The acquisition would be the biggest tech deal to date, and turn Broadcom into the world’s number 3 chip maker behind Intel and Samsung. However, Qualcomm is reportedly going to rebuff the offer, arguing that it undervalues the company. This could set the stage for a proxy fight.
Broadcom officially announced its intention to buy Qualcomm Monday morning, saying that it is willing to pay $70 per share in cash and stock for Qualcomm. That’s 28 percent above Qualcomm’s November 2 closing price. Bloomberg had first reported about Broadcom weighing an offer on November 3, leading its stock to skyrocket.
Both Broadcom and Qualcomm are best known for their mobile chips, which are found in virtually any modern smart phone. The two companies directly compete on some fronts, but have been developing a lot of complementary technology as well. Qualcomm has been making processors for most modern Android phones, including Google’s new Pixel 2 and Samsung’s Galaxy S8.
Broadcom is perhaps lesser-known, but the company’s chips still power key functionality in most modern phones. For instance, a recent tear-down of Apple’s new iPhone X revealed that the device uses Broadcom chips for wireless charging and for its touch-screen controls.
The timing for the merger is no accident: Qualcomm has been engaged in a bitter legal fight with Apple over licensing fees for its chip technologies. Qualcomm has been arguing that Apple hasn’t been paying enough for licensing its intellectual property, but Apple has countered that it has been overcharged by Qualcomm.
Qualcomm has been asking courts to ban the sales of iPhones in a number of territories to put pressure on the phone maker. Apple has countered by stopping all royalty payments to Qualcomm. The chip maker’s stock price has been severely impacted by the legal battle, making it a potential take-over target.