The bid for Qualcomm is an ambitious move by Broadcom chief executive Hock Tan, who has turned a small, scrappy chipmaker into a $100bn company based in Singapore and the US. It has pulled off a string of purchases over a decade.
Buying Qualcomm would make Broadcom the third-largest chipmaker, behind Intel and Samsung Electronics. The combined business would instantly become the default provider of a set of components needed to build each of the more than 1bn smartphones sold every year.
The deal would dwarf Dell’s $67bn acquisition of EMC in 2015 — then the biggest in the technology industry.
Qualcomm, which employs around 100 people in Cork, said it would review the unsolicited proposal. The company could reject the bid as too low and fraught with risk that regulators would reject it or take too long to approve it.
The acquisition would, in particular, raise the stakes for Intel, which has been diversifying from its stronghold in computers into smartphone technology by supplying modem chips to Apple.
Based in California, Qualcomm, whose chips allow phones to connect to wireless data networks, has more than 33,000 employees worldwide.
The firm set up an information technology base in Cork three years ago, with the IDA-backed firm announcing plans to hire 100 staff. The company has a number of engineering and support roles advertised for its Cork base, which is located at the City Gate development in Mahon.
Qualcomm is more vulnerable to a takeover now because its shares have been held down by a patent dispute with Apple, as well as concerns it may have to raise its own $38bn bid for NXP Semiconductors that it made last year.
The lawsuit may prompt Apple to stop buying Qualcomm chips for use in the iPhone and other products, which would be a major blow to a unit that drives the bulk of Qualcomm’s revenue. Meanwhile, Broadcom counts Apple among its largest customers.
As part of the Broadcom deal, Qualcomm shareholders would get $60 in cash and $10 per share in Broadcom shares. Including debt, Broadcom’s bid values the transaction at $130bn.
Any deal struck between the two companies would face intense regulatory scrutiny. A big hurdle would be getting regulatory approval in China, on which both Qualcomm and Broadcom rely on heavily to make money.
China is set to scrutinise any deal closely after US regulators blocked a flurry of chip deals by Chinese firms due to security concerns, thwarting the Asian country’s attempt to become self-reliant in chip manufacturing.
But Broadcom said Bank of America, Citi, Deutsche Bank, JP Morgan, and Morgan Stanley have told it that they are highly confident that they will be able to arrange the necessary debt financing for the proposed transaction.
Broadcom approached Qualcomm last year to discuss a potential combination, but did not contact Qualcomm prior to unveiling its $70 per share offer.