Mobile chip giant Qualcomm wasn't looking to be acquired by another company, but rival Broadcom today made an unsolicited offer to buy the company in a cash and stock deal valued at around $105 billion, or up to $130 billion when including net debt.
The proposal is "compelling for stockholders and stakeholders in both companies," Broadcom president and CEO Hock Tan said today in a statement. Qualcomm has responded with a statement that its board of directors will consider the offer while weighing the best interests of its shareholders, although the Financial Times reported the company appears likely to reject the bid.
The result could be a "long and vicious" takeover campaign, the Financial Times added. If the deal goes through, another result could be significantly higher smartphone prices, according to the investor site TheStreet, which noted, "Get ready for the $2000 smartphone in a world where chipmaking is dominated mostly by one company."
Chip Market Seeing Lots of M&A Activity
Founded in 1991 and headquartered in Singapore and California, Broadcom has made more than a dozen acquisitions over the past 10 years, the most recent was its $5.5 billion takeover last year of Brocade Communications Systems.
Qualcomm has also acquired a number of companies operating in complementary market spaces. The company is currently working to finalize a $47 billion offer launched last year to purchase the Netherlands-based chipmaker NXP Semiconductors.
Combined, Broadcom and Qualcomm would create a global organization with "an impressive portfolio of technologies and products," Tan said in Broadcom's announcement.
"We would not make this offer if we were not confident that our common global customers would embrace the proposed combination," Tan said. "With greater scale and broader product diversification, the combined company will be positioned to deliver more advanced semiconductor solutions for our global customers and drive enhanced stockholder value."
In a report last year, the China-based benchmarking company AnTuTu ranked Qualcomm's Snapdragon 820 system-on-chip the leader in the global smartphone processor market, with more than 21 percent of the market. Qualcomm chips power many of the world's top smartphone models, including the Samsung Galaxy S8 and S8 Plus, and the Google Pixel 2 and Pixel 2 XL.
Qualcomm's broadband processor design is also licensed by Apple for use in its iPhones. However, the two companies are currently battling in court over technology and royalty disputes.
In the company's Q4 2017 earnings call Wednesday, Qualcomm CEO Steven Mollenkopf said the firm had reported "better-than-expected" results and plans to significantly grow its market by 2020.
According to its response today to Broadcom's offer, Qualcomm doesn't plan to make further comment on the acquisition proposal until its board completes a review of the deal. However, according to a Financial Times report today, "several people informed on the matter" said "the company is not prepared to engage with Broadcom."