Broadcom has $100 billion in financing lined up for Qualcomm takeover bid
Broadcom Ltd. has lined up $100 billion in debt financing from a dozen major financial backers to pay for its hostile takeover bid for rival chipmaker Qualcomm Inc., the company said Monday.
The massive debt commitment answers a key concern about whether Broadcom could fund the $121-billion deal — keeping the pressure on Qualcomm’s board of directors ahead of a meeting with Broadcom Chief Executive Hock Tan this week.
Broadcom said it has received commitments for credit for the deal from major banks including Bank of America Merrill Lynch, affiliates of Deutsche Bank, J.P. Morgan, Mizuho, Wells Fargo, BMO Capital, Morgan Stanley, RBC Capital Markets, Mitsubishi Financial and Sumitomo Mitsui Banking Corp.
It also has added private equity firms KKR and CVC Capital, which have joined Broadcom’s longtime private equity backer Silver Lake Partners in agreeing to supply $6 billion in convertible debt to fund the transaction and for working capital after it closes.
Silver Lake had already committed $5 billion in bridge financing and investment funds toward the proposed deal.
Qualcomm’s stock price has been depressed for more than a year because of legal battles with Apple Inc. and global competition regulators over patent licensing — opening the door for Broadcom’s takeover attempt.
The combination of the two chipmakers would create a semiconductor giant with more than $50 billion in annual revenue — trailing only Intel and Samsung.
It also could cause significant upheaval at Qualcomm: Tan has a reputation for running lean. The two companies posted similar sales in the most recent year, but Broadcom, based in Singapore and San Jose, has about 17,000 global employees. Qualcomm has 33,000 employees worldwide, including approximately 13,000 in San Diego, where the company is based.
Broadcom has been pursuing a buyout of Qualcomm since November, and last week raised its offer to $82 per share: $60 in cash and $22 in Broadcom stock. The debt financing would fully fund the cash portion of the deal.
Qualcomm’s board rejected both Broadcom’s original $70-per-share offer and the new higher offer.
Qualcomm contends that even at $82 per share, the price doesn’t put any value to Qualcomm eventually settling its legal disputes, its pending $38-billion acquisition of Dutch automotive chipmaker NXP Semiconductors or the major market opportunity from 5G wireless networks, which are expected to begin rolling out early next year.
Qualcomm also has raised concerns that the acquisition would face tough scrutiny from global antitrust regulators, which could last for 18 months. If regulators eventually block the deal, Qualcomm contends, its business will have been irreparably harmed in the interim.
Tan has countered that $82 per share is his final and best offer. He has proposed an $8-billion breakup fee should regulators block the merger. And he has pledged to pay 6% annual interest on the cash portion of the transaction should the deal fail to close in a year.
Tan also said his offer stands if Qualcomm acquires NXP for the current $110-per-share agreed-upon price or if the offer is terminated. But his deal is off if Qualcomm pays more for NXP.
Activist NXP shareholders are advocating for a higher price for the long-delayed deal, which is still awaiting regulatory approval in China. NXP shareholder Elliott Management says the company is worth $135 per share.
Although Qualcomm’s board rejected Tan’s higher bid, it did agree to meet with Tan this week for the first time. That meeting is expected Tuesday or Wednesday.
Meanwhile, Broadcom has nominated 11 candidates to replace Qualcomm’s entire board of directors to push the deal through.
Shareholders will vote on Broadcom’s candidates or Qualcomm’s current board by the company’s March 6 annual stockholder meeting.
Freeman writes for the San Diego Union-Tribune.
