Qualcomm says takeover deal has ‘unacceptably high level of risk’

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SAN DIEGO — The Qualcomm board believes the price offered by Broadcom in its $121 billion takeover deal is too low, and it is concerned about whether the deal would survive antitrust scrutiny, Qualcomm Chairman Paul Jacobs wrote Friday.

Jacobs wrote the letter to Broadcom Chief Executive Hock Tan after leaders from the two companies met Wednesday to discuss an offer that Broadcom officials maintain is their “best and final” offer, Jacobs said. The Qualcomm board rejected that offer last week, but Jacobs requested the meeting in an effort to press Broadcom about what it would do to ensure the transaction cleared regulatory hurdles and whether it would budge on the $82-per-share offer.

“The board remains unanimously of the view that this proposal materially undervalues Qualcomm and has an unacceptably high level of risk, and therefore is not in the best interests of Qualcomm stockholders,” Jacobs wrote. “That said, our board found the meeting to be constructive in that the Broadcom representatives expressed a willingness to agree to certain potential antitrust-related divestitures beyond those contained in your publicly filed merger agreement.”

However, Jacobs said that Broadcom did not agree to commitments that would likely be expected by regulatory authorities in the U.S., Europe and China nor did it respond to questions about its plans for the future of Qualcomm’s licensing business, which “makes it very difficult ot predict the antitrust-related remedies that might be required.”

A Broadcom spokesman said that the company would send out a statement in response to Jacobs’ letter Friday.

Like the deal rejected by the Qualcomm board in November, this one would have paid Qualcomm shareholders $60 per share in cash. But the latest offer included an increase in Broadcom stock that would be paid to Qualcomm shareholders — $22 per share, up from $10.

Broadcom is incorporated and currently based in Singapore, but Tan announced late last year while visiting President Donald Trump at the White House that the company would return its corporate headquarters to the U.S., using San Jose as a base.

Buying Qualcomm would make Broadcom the third-largest chip maker, behind Intel Corp. and Samsung Electronics Co. The combined business would become the default provider of a set of components needed to build each of the more than one billion smartphones sold every year.

The company’s hostile takeover attempt has come at a vulnerable time for Qualcomm, which has been embroiled in a long-running legal dispute with Apple and is facing several large fines from governing bodies across the globe. The most recent such fine levied against the San Diego company came from the European Union, which accused Qualcomm of breaking the EU’s antitrust laws to the tune of $1.23 billion. Qualcomm said it would challenge that fine.

If Broadcom is ultimately successful in its takeover attempt, the impact on San Diego could be severe. Qualcomm is one of the few major corporations with a global reach to be headquartered in a city known mainly for tourism, and smaller defense and life-sciences firms.

The company is one of the region’s largest private employers, and the family of co-founder Irwin Jacobs is one of the area’s most generous philanthropists.

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