Broadcom’s BLOCKED $130 billion Acquisition of Qualcomm

 

Overview of the deal

  • Acquirer: Broadcom Ltd. (NASDAQ: AVGO)

  • Target: Qualcomm Inc. (NASDAQ: QCOM)

  • Estimated value: $130bn ($25bn including net debt)

  • Announcement date: 2/11 - 2017

  • Acquirer Advisors: Moelis & Company, Glass Lewis, ISS (Board of Directors)

  • Target Advisors: Goldman Sachs, Evercore, Sard Verbinnen (Board of Directors)

This takeover bid ($130bn) for Qualcomm, from rival Broadcom, would create a semiconductor giant because it would be a one-stop shop for smartphone makers looking for everything from cutting-edge processors to wireless networking.


Buying Qualcomm would make Broadcom the third-largest chipmaker, behind Intel Corp. and Samsung Electronics Co. The combination of the two companies would generate extensive synergies and create a dominant wireless business. Since Qualcomm’s most profitable unit, which licenses mobile phone technology, is under assault from regulatory actions around the world and from Apple Inc, a change of management in Qualcomm after the successful deal could have helped to resolve the dispute with Apple Inc.


Company details (Broadcom Limited)

Broadcom Limited is a diversified global semiconductor leader built on 50 years of innovation, collaboration and engineering excellence.


- Founded in 1991 and headquartered in Irvine, California, US

- CEO: Hocke E. Tan (Since 2016)

- Number of employees: 15,700

- Market Cap: $101.619bn - EV: $100.32bn

- LTM Revenue: $17.64bn - LTM EBITDA: $7.52bn

- LTM EV/Revenue: 5.69x - LTM EV/EBITDA: 13.33x

Company details (Qualcomm)

Qualcomm is an American multinational semiconductor and telecommunications equipment company that designs and markets wireless telecommunications products and services.


- Founded in 1985 and headquartered in San Diego, California, US

- CEO: Steven Mollenkopf (Since 2014)

- Number of employees: 33,500

- Market Cap: $94.73bn - EV: $85.25bn

- LTM Revenue: $22.36bn - LTM EBITDA: $6.14bn

- LTM EV/Revenue: 3.81x - LTM EV/EBITDA: 13.88x

Projections and assumptions

  • Short-term consequences

Rationale for the deal can, initially, be simplified if we take a step back and realise that the expected size and market share of the combined companies would make them an even larger player in the semiconductor and wireless telecommunication technology industry. The IP assets of Qualcomm are tremendous, and the size of the combined companies would have made them the worldwide driving force in the semiconductor space.