The incumbent Qualcomm broad rejected Broadcom’s hostile acquisition bid, so Broadcom’s cunning plan is to replace it with one that may think differently.
December 4, 2017
The incumbent Qualcomm board rejected Broadcom’s hostile acquisition bid, so Broadcom’s cunning plan is to replace it with one that may think differently.
When we reported the bid rejection we asked: what now? The general assumption was that Broadcom would raise its initial low-ball offer and the word on the street was that $80 per share might tempt its shareholders. But rather than do that it looks like Broadcom instead wants to ramp up the pressure on Qualcomm to accept the offer as it stands.
“We have heard from many Qualcomm stockholders who have expressed their desire for Qualcomm to engage with us,” said Hock Tan, Broadcom CEO. “We also continue to receive positive feedback from customers and, having had initial meetings with certain relevant antitrust authorities, remain confident that any regulatory requirements necessary to complete a combination will be met in a timely manner.
“Although we are taking this step, it remains our strong preference to engage in a constructive dialogue with Qualcomm. We have repeatedly attempted to engage with Qualcomm, and despite stockholder and customer support for the transaction, Qualcomm has ignored those opportunities.
“The nominations give Qualcomm stockholders an opportunity to voice their disappointment with Qualcomm’s directors and their refusal to engage in discussions with us. In light of the significant value our proposal provides for Qualcomm stockholders, we believe Qualcomm stockholders would be better served by new independent, highly qualified nominees who are committed to maximizing value and acting in the best interests of Qualcomm stockholders.”
So it looks like Qualcomm’s existing board won’t even discuss the bid and this move is designed to pressure it into doing so. What there is to discuss, however, is another matter. Qualcomm has already said the bid is too low and would presumably just repeat that position in the desired discussions. This seems more of a move to put pressure on the board to accept the next bid, which will presumably be nowhere near $80.
Qualcomm has acknowledged receipt of Broadcom’s board nominations, the descriptions of whom in the Broadcom announcement we have copied below. The presence of Samih Elhage, who used to head up Nokia’s mobile networks business unit, is especially intriguing. In its acknowledgement Qualcomm is pretty dismissive of this latest move.
“Qualcomm believes that this action is a blatant attempt to seize control of the Qualcomm Board in order to advance Broadcom’s acquisition agenda,” said the statement. “These nominees are inherently conflicted given Broadcom’s desire to acquire Qualcomm in a manner that dramatically undervalues Qualcomm to Broadcom’s benefit.”
The board nominations will be voted on at the Qualcomm AGM early next year, but it would be surprising if shareholders took this opportunity to effectively hand the company over to Broadcom at $70 per share when they can reasonably expect at least an additional 10% return on their investment.
Broadcom’s nominees for the Qualcomm Board are:
Samih Elhage, former President of the Mobile Networks Business Group of Nokia Corporation. Previously held the role of Chief Financial and Operating Officer of Nokia Siemens Networks and Nokia Networks, subsidiaries of Nokia. Also served on the Boards of Alcatel-Lucent Corporation, Alcatel Shanghai Bell, and Quickplay Media Inc.
Raul J. Fernandez, Vice Chairman of Monumental Sports & Entertainment and former Chairman and CEO of ObjectVideo, Inc. Also served as CEO of Dimension Data North America and as Chairman, CEO and President of Proxicom, Inc. Serves on the Boards of AtSite, Inc. and Perfect Sense, Inc., and previously served as a Director of Kate Spade & Company.
Michael S. Geltzeiler, consultant for Temasek Holdings. Previously served as Senior Vice President and CFO of ADT Corporation and before that, CFO and Group Executive Vice President at NYSE Euronext.
Stephen J. Girsky, Managing Partner of VectoIQ, an independent advisory firm. Previously served in a number of capacities at General Motors, including Vice Chairman. Serves on the Boards of United States Steel Corporation, Brookfield Business Partners, Drive.ai, and Valens Semiconductor Ltd. Previously served as a Director of GM following its emergence from bankruptcy and as Lead Independent Director of Dana Holdings Corp.
David G. Golden, Managing Partner at Revolution Ventures. Previously spent 18 years at J.P. Morgan, including five years as Vice Chairman and Director of technology, media and telecommunications investment banking. Serves on the Boards of Barnes & Noble Education, Inc. and Blackbaud, Inc. Previously served as a Director of Everyday Health, Inc. and Barnes & Noble, Inc.
Veronica M. Hagen, retired President and CEO of Polymer Group, Inc. (later renamed AVINTIV Specialty Materials Inc). Also served as President and CEO of Sappi Fine Paper and held multiple positions at Alcoa, including Vice President and Chief Customer Officer and business unit president of Alcoa Engineered Products. Serves on the Boards of Newmont Mining Corporation, the Southern Company, and American Water Works Company, Inc. Previously served as a Director of AVINTIV, Jacuzzi Brands, Inc., and Covanta.
Julie A. Hill, owner of The Hill Company. Serves on the Board of Anthem, Inc. and was a Director of WellPoint Health Networks Inc. prior to its merger with Anthem. Has been a trustee of the Lord Abbett Family of Mutual Funds since 2004 and previously served as a Director of Lend Lease, Ltd., Resources Connection, Inc., and Holcim US.
John H. Kispert, Managing Partner of Black Diamond Ventures. Previously served as President and CEO and a Director of Spansion, Inc.through its merger with Cypress Semiconductor Corporation. Serves on the Boards of Gigamon Inc. and Barracuda Networks, Inc. Previously served as a Director of Cypress, TriNet Group, Inc., and Extreme Networks, Inc., where he was Chairman.
Gregorio Reyes, former Director and Chairman of the Boards of Dialog Semiconductor plc and LSI Corporation, and former Director of Seagate Technologies Public Limited Company. Previously was a co-founder and Chairman of Sunward Technologies Inc., Chairman and CEO of American Semiconductor Equipment Technologies, and President and CEO of National Micronetics. Held positions at National Semiconductor, Motorola, Fairchild Semiconductor, and Eaton.
Thomas S. Volpe, Managing Member of Volpe Investments LLC. Previously CEO of Dubai Group LLC, a diversified investment firm based in the United Arab Emirates, and before that, served as Chairman of Prudential Volpe Technology Group. Served on the Boards of Linear Technology Corporation and EFG-Hermes Holding Company.
Harry L. You, President, CFO and Director of GTY Technology Holdings Inc. Previously served as Executive Vice President in the Office of the Chairman of EMC Corporation. Served as CEO of BearingPoint Inc., Executive Vice President and CFO of Oracle Corporation and CFO of Accenture Ltd. Previously served as a Director of Korn/Ferry International.
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