Unsolicited cash and stock offer has potential to create $51 billion chip behemoth

Broadcom on Monday launched a $103 billion unsolicited bid for rival chip maker Qualcomm, in what could be the largest tech merger in history.

The offer comprises $60 cash and $10 of Broadcom stock per Qualcomm share, which represents a 28% premium on the latter’s closing price on 2 November, the last trading day before rumours of the bid emerged. Broadcom’s proposed transaction is valued at $130 billion on a pro forma basis, including $25 billion of net debt.

Broadcom says its offer stands regardless of whether Qualcomm manages to complete its proposed $47 billion acquisition of NXP Semiconductors.

"Our proposal provides Qualcomm stockholders with a substantial and immediate premium in cash for their shares, as well as the opportunity to participate in the upside potential of the combined company," said Broadcom CEO Hock Tan, in a statement.

The combined company would have pro forma fiscal 2017 revenues of around $51 billion and pro forma EBITDA of $23 billion, including synergies.

In a brief statement, Qualcomm acknowledged it has received Broadcom’s offer.

"The Qualcomm board of directors, in consultation with its financial and legal advisors, will assess the proposal in order to pursue the course of action that is in the best interests of Qualcomm shareholders," the company said. "Qualcomm will have no further comment until its board of directors has completed its review."

Broadcom said Qualcomm’s cellular chip business is highly complementary to its own portfolio – which includes semiconductors for products including set-top-boxes and modems, among others – and that the transaction would create a company with the scale to innovate at a faster pace, to the benefit of customers.

"Following the combination, Qualcomm will be best positioned to build on its legacy of innovation and invention. Given the common strengths of our businesses and our shared heritage of, and continued focus on, technology innovation, we are confident we can quickly realise the benefits of this compelling transaction for all stakeholders," Tan said.

Broadcom said it has had written assurances from BofA Merrill Lynch, Citi, Deutsche Bank, J.P. Morgan, and Morgan Stanley regarding debt financing for the proposed acquisition. Broadcom’s strategic partner, Silver Lake Partners, has also committed to providing $5 billion of convertible debt financing.

Broadcom said it is prepared to engage immediately in discussions with Qualcomm, adding that it would expect the proposed transaction to close within approximately 12 months following the signing of a definitive agreement.

"This complementary transaction will position the combined company as a global communications leader with an impressive portfolio of technologies and products," Tan said. "We would not make this offer if we were not confident that our common global customers would embrace the proposed combination."