A deal between semiconductor giants Broadcom and Qualcomm would create a massive global tech company with about $51 billion in annual revenue.
Broadcom is pitching a deal to acquire Qualcomm for more than $103 billion in a combination of two semiconductor giants that are crucial to the speed, functionality and cost of smartphones.
A deal would create a global tech company with about $51 billion in annual revenue and major customers such as Apple.
Broadcom publicized its proposed deal in a letter to Qualcomm that was sent to investors and the media Monday morning.
It was not immediately clear whether Qualcomm plans to engage Broadcom is deal discussions or plans to fight the proposal.
Broadcom offered to pay $70 per share for Qualcomm, with $60 in cash and $10 in stock. Qualcomm ( QCOM) shares were up nearly 4% in premarket trading Monday at $64.26. Shares rose more than 12% on Friday after news reports detailed Broadcom’s potential bid.
The company said it would maintain its offer regardless of the outcome of Qualcomm’s ongoing effort to acquire NXP Semiconductors.
“This complementary transaction will position the combined company as a global communications leader with an impressive portfolio of technologies and products,» Broadcom CEO Hock Tan said in a statement.
«We would not make this offer if we were not confident that our common global customers would embrace the proposed combination,» Tan continued. «With greater scale and broader product diversification, the combined company will be positioned to deliver more advanced semiconductor solutions for our global customers and drive enhanced stockholder value.”
Qualcomm’s board of directors will assess the bid, the company said in a news release Monday, «to pursue the course of action that is in the best interests of Qualcomm shareholders.»
A merger of Broadcom, which specializes in wired communication technology, with Qualcomm, a wireless tech manufacturer, «would make strategic sense and would be highly accretive, bringing two communications powerhouses together ahead of the 5G technology cycle,» said Christopher Rolland, an analyst with Susquehanna Financial Group, in a note to investors Monday.
Broadcom’s bid also provides an explanation for its announcement Thursday that it plans to move its legal headquarters to the U. S., he said. Qualcomm developed CDMA communications technologies used by smartphones on networks by Verizon, Sprint and other carriers. Had Broadcom proposed this bid and remained co-headquartered in Singapore «we don’t think the U. S. government would allow important (those) technologies to leave to a Singapore-based entity,» Rolland said.
Still, this merger has significant regulatory hurdles because «the combined entity would dominate the high-end WiFi market,» he said.
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