Tim Mueller’s Transaction Analysis: New IT M&A Deals Nov. 7

Broadcom Makes $100+ Billion Offer for Qualcomm

Financial Information*

  • Transaction Value $130 B
  • EV/LTM Revenue 5.9x
  • EV/LTM EBITDA 20.9x

Transaction Facts

  • Semiconductor giant Broadcom (Nasdaq:AVGO) today announced a proposed takeover bid for fellow chip leader Qualcomm (Nasdaq:QCOM), totaling $130 billion in value including debt.
  • If approved, the deal would be the largest ever tech deal and create a behemoth in the smartphone component space.
  • In response, Qualcomm said only that it would have no comment until its board completes a review of the bid.
  • Shares of Broadcom rose 1.4 percent, while shares of Qualcomm rose approximately 1 percent.

Snowball Effect

  • Broadcom’s Latest and Greatest: Broadcom, once a division of HP, has grown significantly — in large part to to an aggressive appetite for M&A. Its current form is itself the product of an acquisition: Singapore-based Avago Technologies acquired Broadcom in 2015, taking on its name in what was then the largest tech deal ever.
  • Seizing a Perceived Opportunity: Qualcomm has been enduring a challenging period, seeing its share price fall approximately 20 percent in the last 12 months and engaging in dueling lawsuits by Apple over its patent licensing model. The company is also in the middle of its own large semiconductor acquisition — one year ago, it announced that it agreed to acquire NXP Semiconductors for an enterprise value of approximately $45 billion.
  • Tight Scrutiny: This deal is expected to face significant regulatory attention from an antitrust perspective, as well as from a national security perspective given Broadcom’s current legal headquarters location in Singapore. Broadcom President Hock Tan recently appeared with President Trump in the White House to announce that the company would be moving to the United States — with some analysts attributing the move to Broadcom’s need for political capital to spend on getting this deal approved.
  • The Goldilocks Factor: Analysts expect Qualcomm to reject the proposal, which at $70 per share represents a 28 percent premium to the deal’s closing price on Thursday before rumors of the deal were reported. The company believes it is positioned for growth thanks to its technology and patent portfolio, its pending NXP acquisition and successful resolution of its ongoing lawsuits from Apple.

For more information about this transaction, click here to read the press release.

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