Qualcomm rejects Broadcom's 'inadequate' $121bn bid

Door slams shut on what would have been the biggest tech acquisition ever

Qualcomm's board of directors has unanimously rejected Broadcom's monster $121bn (£87bn) bid for the chip maker.

Qualcomm rejected an initial $103bn bid from its rival in November, and an improved offer has been met with equal uninterest, with the Qualcomm board branding it "inadequate".

Qualcomm has released a letter it penned to Broadcom in reply to the latest bid, but it left the door open for a further bid by directly asking for its rival's potential highest bid.

"Your proposal [takeover bid] raises more questions than it answers," said Paul Jacobs, chairman of the board, in the letter addressed to Broadcom president and CEO Hock Tan.

"The board has unanimously determined that your amended offer materially undervalues Qualcomm and falls well short of the firm regulatory commitment the board would demand given the significant downside risk of a failed transaction.

"However, the board is committed to exploring all options for maximising shareholder value, and so we would be prepared to meet with you to allow you to explain how you would attempt to bridge these gaps in both value and deal certainty and to better understand the significant issues that remain unaddressed in your proposal."

Jacobs explained that in that meeting, the firm would expect Broadcom to provide clear, specific and detailed answers to the questions: What is the true highest price at which you would be prepared to acquire Qualcomm? Is it $82 per share or is it higher? Is Broadcom willing to commit to take whatever actions are necessary to ensure the proposed transaction closes?

"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," continued Jacobs.

"Your proposal is inferior relative to our prospects as an independent company and is significantly below both trading and transaction multiples in our sector."

Jacobs added that it is indisputable that there are significant regulatory hurdles in the proposed transaction.

"It is also indisputable that if Qualcomm entered into a merger agreement and, after an extended regulatory review period the transaction did not close, Qualcomm would be enormously and irreparably damaged," he added.