Monday, November 6, 2017

Broadcom bids $130 billion to acquire Qualcomm

In what could become the largest tech merger to date, Broadcom announced a proposal to acquire all of the outstanding shares of Qualcomm for $70.00 per share in cash and stock, making the offer worth $130 billion in total, a 28% premium over the closing price of Qualcomm common stock on November 2, 2017

Broadcom cites the following benefits of a merged company:

  • Creates a Leading Diversified Communications Semiconductor Company: Qualcomm's cellular business is highly complementary to Broadcom's portfolio, and the combination will create a strong, global company with an impressive portfolio of technologies and products.
  • Accelerates Innovation to Deliver More Advanced Semiconductor Solutions to Global Customers: As a result of enhanced scale, reach and financial flexibility, the combined company will benefit from the ability to accelerate innovation and deliver more advanced semiconductor solutions to its broad global customer base.
  • Compelling Financial Benefits: The combined company will have an enhanced financial profile, benefiting from Broadcom's proven operating model with industry-leading margins. The combined Broadcom and Qualcomm, including NXP, will have pro forma fiscal 2017 revenues of approximately $51 billion and pro forma 2017 EBITDA of approximately $23 billion, including synergies. The transaction is expected to be accretive to Broadcom's Non-GAAP EPS in the first full year after close.

"Broadcom's proposal is compelling for stockholders and stakeholders in both companies. 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 Hock Tan, President and Chief Executive Officer of Broadcom. "This complementary transaction will position the combined company as a global communications leader with an impressive portfolio of technologies and products. We would not make this offer if we were not confident that our common global customers would embrace the proposed combination. 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."

Some other notes about the offer:

  1. Hock Tan, Broadcom's CEO, discussed a merger with Qualcomm's CEO, Steve Mollenkopf, as early as August 2016. Broadcom's stock has appreciated 55% since that time.
  2. The offer stands whether or not Qualcomm consummates its acquisition of NXP
  3. Broadcom is confident it will be able to arrange the necessary debt financing for the deal
  4. Broadcom is confident it will receive all necessary regulatory approvals.


Qualcomm to Acquire NXP -- Engines for the Connected World

Qualcomm agreed to acquire all of the issued and outstanding shares of NXP for $110.00 per share in cash, representing a total enterprise value of approximately $47 billion. The deal will be financed through cash on hand and $11 billion in new debt. The companies expect total annualized synergies of $500 million within two years of close.

NXP Semiconductors N.V., which headquartered in Eindhoven, Netherlands, employs approximately 45,000 people in more than 35 countries and is known for its mixed-signal semiconductor electronics. The company was known as Philips Semiconductor prior to 2006.

Key markets include automotive, broad-based microcontrollers, secure identification, network processing and RF power. NXP has a broad customer base, serving more than 25,000 customers through its direct sales channel and global network of distribution channel partners.

For Q3 2016, NXP reported revenue of $2.469 billion, up 4.4% over a year ago, and GAAP gross profit of $1.184 billion, up 7.7% over a year ago.

The combined company is expected to have annual revenues of more than $30 billion, serviceable addressable markets of $138 billion in 2020 and leadership positions across mobile, automotive, IoT, security, RF and networking.

"With innovation and invention at our core, Qualcomm has played a critical role in driving the evolution of the mobile industry. The NXP acquisition accelerates our strategy to extend our leading mobile technology into robust new opportunities, where we will be well positioned to lead by delivering integrated semiconductor solutions at scale," said Steve Mollenkopf, CEO of Qualcomm Incorporated. "By joining Qualcomm's leading SoC capabilities and technology roadmap with NXP's leading industry sales channels and positions in automotive, security and IoT, we will be even better positioned to empower customers and consumers to realize all the benefits of the intelligently connected world."

Qualcomm also noted that the acquisition is a tax efficient use of its offshore cash.

http://investors.nxp.com/
http://www.qualcomm

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