Qualcomm Turns Its Back to $121 Bn Buyout Offer. Here’s Why

Qualcomm at CES 2016Qualcomm has just refused a “best and final” buyout offer of $121 billion from Broadcom, citing regulatory concerns and valuation issues. The company’s board unanimously vetoed the bid, but shareholders will have the last say in the matter next month.

Broadcom urged the chipmaker to meet up over the weekend to negotiate an offer of $82 per share. In a letter to the chairman of the board, Broadcom’s CEO Hock Tan expressed his astonishment over Qualcomm reluctance to meet before Tuesday.

On Thursday, the San Diego-based chipmaker said Broadcom’s bid “materially undervalues” the company and does not comply with the firm’s regulatory commitment which is needed for the transaction to be approved by the U.S. government.

Qualcomm Says No to Broadcom, Again

It is not the first time Qualcomm rejects an offer from Broadcom. In November, it turned down a bid of $70 per share. But the second rejection is temporary as shareholders will decide on March 6 if the company should be taken over.

If shareholders vote for a buyout, Broadcom would expand its portfolio of firms and carry out its strategy of boosting those firms’ profits. If the deal fails Qualcomm, would be able to continue with its current strategy of promoting growth through new investment in research and new technologies.

Qualcomm’s board chairman replied to Tan’s letter, saying that the latest “proposal is inferior relative to our prospects as an independent company”. Also, the bid does not meet the company’s transaction and trading multiples.

Broadcom is now one of the planet’s largest suppliers of semiconductors. But for Tan that is not enough. He wants Qualcomm onboard for its modem-chip division for smartphones. Tan is confident Qualcomm’s products will continue to dominate the market.
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