Broadcom plans $100bn unsolicited bid for Qualcomm

Broadcom is planning to make an unsolicited takeover bid for Qualcomm that could value its rival US chipmaker at more than $100bn, according to two people briefed on its plans.

The Singapore-headquartered chipmaker’s advisers are planning to present an offer to Qualcomm as early as this weekend in what would be the largest ever semiconductor deal, those people added.

One person close to Broadcom said the offer for Qualcomm would be about $70 per share, a level the stock has not seen for more than two years.

Shares in Qualcomm rose 12.7 per cent on Friday in New York to close at $61.81, giving the company a market value of $91.1bn. Broadcom climbed 5.5 per cent to $273.63, making it worth $111.6bn. Any deal between the two companies would face significant regulatory scrutiny, given the already heavy level of consolidation in the chip industry.

As part of its proposal, Broadcom is willing to also buy NXP, which Qualcomm agreed to buy in 2016 in a $38bn deal that is yet to complete due to a continuing antitrust investigation.

Broadcom’s offer comes after months of weakness in Qualcomm’s stock, as its legal battle with Apple over wireless chip pricing, patents and alleged anticomptitive behaviour has continued to escalate.

A deal would cap an acquisition binge which has made Hock Tan, Broadcom’s chief executive, the chip industry’s leading dealmaker in a period of heightened consolidation. Starting out as Avago, a spin-off of Hewlett-Packard’s chip division, the company has mounted a series of purchases of companies that had once appeared out of its reach.

These included a $6.6bn purchase of LSI in 2013, a $600m deal for Emulex in 2015 and $37bn acquisition of Broadcom in 2016, which allowed the company to redomicile its base to Singapore and capture a lower tax rate in a so-called tax inversion. Avago was renamed Broadcom after the deal.

Mr Tan said on Thursday that Broadcom would switch its legal base and headquarters to the US, a move that was seen as a prelude to further acquisitions. The move, which he announced in the the Oval Office alongside President Donald Trump, was expected to clear the way in the short term for Broadcom’s $5.5bn acquisition of Brocade, which has been held up by a security review in Washington because Broadcom’s legal base is outside the US. But analysts said it would also remove a barrier which stood in the way of Broadcom’s next phase of acquisition-fuelled growth.

A famously cost-conscious operator, Mr Tan’s round of dealmaking has had the backing of Silver Lake, the technology private equity firm. Silver Lake mounted a buyout of Avago in 2005, along with KKR, before taking it public again in 2009.

For Qualcomm, an approach would come as it continues to struggle to close its planned acquisition of Europe’s NXP Semiconductors, which was agreed in October 2016. In an interview with the Financial Times this week, Steve Mollenkopf, Qualcomm chief executive, said that there was a good chance of the deal’s closing moving into next year.

Shares in Qualcomm were battered this week by poor quarterly results, which saw profits plunge sharply, and by reports that Apple is preparing new iPhones and iPads without components from the chipmaker.

Before the gains late on Friday, the company’s stock had fallen close to 18 per cent over the past year. That compares with a 50 per cent jump in the share price of Broadcom in the same period.

Meanwhile, shares in New York-listed NXP fell 2.1 per cent to $115.02.