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Broadcom remains in the hunt for Qualcomm even as it lowers its bid

Broadcom remains in the hunt for Qualcomm even as it lowers its bid
Broadcom's original offer for Qualcomm stands if Qualcomm doesn’t close the deal to buy NXP Semiconductor. (John G. Mabanglo / EPA / Shutterstock)

Broadcom trimmed its hostile takeover offer for Qualcomm on Wednesday after the San Diego company agreed to pay more for Dutch automotive chip maker NXP Semiconductors.

But Broadcom said it remains committed to acquiring Qualcomm even with NXP in tow.

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Broadcom's new offer is $79 a share — $57 in cash and $22 in Broadcom stock — should NXP be included in the deal. That price values Qualcomm at $117 billion.

Its original offer of $82 a share stands if Qualcomm can't close its deal to buy NXP, which makes chips used in cars and is a key cog in the San Diego company's growth strategy to diversify its business beyond smartphones.

The $82-a-share offer consists of $60 in cash and $22 in Broadcom stock and values Qualcomm at $121 billion.

Broadcom urged Qualcomm shareholders to support the six alternative candidates it has nominated to Qualcomm's board of directors — which would give it majority control of Qualcomm's 11-member board of directors and enable it to push the hostile takeover through. Shareholders will vote for either Broadcom's candidates or Qualcomm's existing board at its annual shareholder meeting March 6.

The tweaks in Broadcom's offer came after Qualcomm on Tuesday raised its bid for NXP to $127.50 a share from $110 a share.

Qualcomm increased the price as activist NXP shareholders argued that the company was worth more today than it was when Qualcomm first agreed to buy it in October 2016, as evidenced by a 20% increase in NXP's operating income in 2017.

Broadcom — based in Singapore and San Jose — criticized the higher price, saying it would transfer $6.2 billion in value from Qualcomm shareholders to NXP shareholders.

"Qualcomm's board acted against the best interests of shareholders by unilaterally transferring excessive value to NXP's activist stockholders," Broadcom said in a statement.

In response, Qualcomm said NXP is a good deal that's forecast to boost Qualcomm's adjusted profits by $1.50 a share next year. It also expands Qualcomm's footprint in fast-growing automotive and "Internet of Things" industries and provides a safety net for shareholders should a Broadcom hostile takeover fail antitrust regulatory review.

"Broadcom's reduced proposal has made an inadequate offer even worse despite the clear increase in value to Qualcomm stockholders from providing certainty around the NXP acquisition," the company said in a statement. "Broadcom has refused and continues to refuse to engage with Qualcomm on price."

Qualcomm's NXP acquisition has received approval from eight global regulators but still needs the green light from China.

If completed, it would make Qualcomm more expensive for Broadcom to acquire, and probably complicate an already difficult antitrust review of the Qualcomm-Broadcom combination, which would be the largest semiconductor merger ever.

Qualcomm contends Broadcom's offer ignores its growth prospects from 5G and the expansion of cellular technologies beyond smartphones and into other industries.

Qualcomm's shares slipped 59 cents, or 0.9%, to $63.40 on Wednesday. Broadcom's shares were down $1, or 0.4%, to $248.62.

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Freeman writes for the San Diego Union-Tribune.

Twitter: @TechDiego

UPDATES:

1:45 p.m.: This article was updated with additional quotes, analysis and closing stock prices.

This article was originally published at 6:45 a.m.

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