Broadcom raised its takeover bid for its rival chipmaker Qualcomm to about $121 billion Monday, piling pressure on Qualcomm to agree to what would be the biggest-ever takeover in the technology industry.
In offering $82 a share, Broadcom raised the stakes a month before Qualcomm’s annual shareholder meeting, at which it hopes to unseat the entire board. The bid, according to Broadcom, is its “best and final” offer.
“Any rational board would consider what we’ve put forward,” Hock Tan, Broadcom’s chief executive, said by telephone.
The move by Broadcom comes at a time of consolidation in the chipmaking industry, and it would create a tech giant whose products would be used in nearly all of the world’s smartphones. Whether a deal actually goes ahead, however, remains an open question — Qualcomm’s leadership is fiercely opposed, while analysts have said that even if shareholders approved the deal, it could be rejected on antitrust grounds.
Qualcomm’s management team and board have consistently argued that the takeover approach was opportunistic — coming during its bruising legal fight with Apple, one of its biggest customers — and priced too low.
But the revised offer may entice shareholders of the target company into demanding that its executives begin negotiations. Qualcomm reported a 96 percent drop in operating income last week, as Apple has refused to pay some licensing fees. It is also struggling to complete its own takeover bid, for the chipmaker NXP Semiconductor, amid pushback from investors of that company.
For Tan, who built Broadcom over nearly a decade from a series of takeovers, Qualcomm’s problems are ones that he and his team can fix — and that Qualcomm has not shown that it can do on its own.
“We have a lot of respect for the tech and the innovation that comes with the 5G technology,” he said, referring to the next-generation wireless standard that Qualcomm has touted as its next big business opportunity. “But we believe, given our track record, we can do much more.”
Broadcom did more than raise its offer price Monday. It also pledged to pay a “significant” breakup fee in case a deal with Qualcomm is vetoed by regulators, as well as to pay additional cash if the two companies have not closed a transaction a year after announcement. It also committed to other steps to closing a transaction, including selling overlapping businesses.
Those moves are meant to highlight Broadcom’s commitment to the deal.
Such assurances may prove important, given questions among analysts and investors over whether a combination of the two could win regulatory approval. There are concerns that the chip industry is increasingly concentrated in just a few hands.
Tan argued that Broadcom had held constructive talks with regulators around the world, and that his company had a track record of quickly closing deals. He also dismissed Qualcomm’s repeated concerns about antitrust issues.
“Based on what Qualcomm has been spinning the last six months, they’ve been short on specifics and heavy on rhetoric,” Tan said.
In a statement, Qualcomm said that it was considering the new bid.
Broadcom also said that it would withdraw its offer if Qualcomm rescheduled its annual shareholder meeting from March 6, or if it paid more than the $110 a share that it has already bid for a smaller chipmaker, NXP Semiconductor.
The deal would mark a significant change in the chipmaking industry. Qualcomm is an industry giant, helping build the modern mobile phone sector with its technology. Its collection of patents is one of the most valuable assets in the world of wireless telecommunications. But more recently, it has faced a multitude of legal and shareholder challenges.
