Qualcomm rejects Broadcom’s $121 billion bid

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The largest tech acquisition offer in history wasn’t enough.

Qualcomm’s board of directors issued a statement on Thursday saying that they are turning down Broadcom’s $121 billion bid to buy the competing chipmaker.

According to the release, Qualcomm “unanimously rejected” an “unsolicited proposal” to buy all of its shares at $82 each, of which $60 would be cash and $22 stock. Broadcom made the revised offer on Monday, up from the previously proposed deal price of $70 per share.

Qualcomm says that it is still undervalued at $121 billion. The board wrote a letter to Broadcom, stating it is worth more, specifically because “your proposal ascribes no value to our accretive NXP acquisition, no value for the expected resolution of our current licensing disputes and no value for the significant opportunity in 5G. Your proposal is inferior relative to our prospects as an independent company and is significantly below both trading and transaction multiples in our sector.”

In other words, Qualcomm thinks it can eventually be worth more on the stock market than $121 billion. Boards of public companies have a fiduciary duty to consider shareholders, so Qualcomm needed to justify why it was turning this down.

This is partly because it doesn’t think Broadcom is appreciating the value gathered fromQualcomm’s recent acquisition of NXP Semiconductor.  It also believes that Broadcom is underestimating Qualcomm’s ability to excel at making 5G wireless technology, which it hopes will be instrumental to IoT, short for “Internet of Things.” This could help connect internet in cars, homes and wearable devices.

It presently has a market cap of $92 billion, despite months of deal talks. This implies that the stock market doesn’t think it will end up selling for its desired price in the near future.

Qualcomm shareholders will be voting on March 6th whether to replace its board with Broadcom’s nominees.

Even if Qualcomm were to approve the deal, it’s also not clear if it will actually go through. Regulators may decide that it would have too much power over the smartphone chip market.

Qualcomm already works on both Apple and Samsung phones. It also works with a handful of Chinese competitors. This was the basis for a recent lawsuit.

Qualcomm’s shares recently fell on reports that Apple could start working with Intel instead. Intel’s stock has not traded up this week, however.

The EU recently fined Qualcomm $1.2 billion because of an exclusivity deal with Apple that it felt was unfair.