The saga of the Broadcom-Qualcomm bid is becoming more like a day-time soap now. Bloomberg reported a new twist to the tale – Intel Corp. may be planning to make a bid for Broadcom Ltd. People familiar with the matter said that Intel is looking at acquiring Broadcom as a defensive bid against the latter’s attempt to buy out Qualcomm.
Intel is the world’s second largest chip maker, however, if Broadcom were successful in its bid for Qualcomm, then the company would be faced by a massive threat in the newly created giant. The Wall Street Journal reported that if Intel felt that Broadcom was going to succeed in its bid, then the company would step in with a counter offer for Broadcom.
According to the Wall Street Journal report, Intel has been working with advisors since last year to see how it can make this move. However, internal sources said that there was nothing concrete yet. No takeover discussions had been initiated and this is not one of the most likely outcomes, said the same sources. In fact, it was more probable that Intel would target smaller acquisitions for now.
Broadcom is a market leader in chips that control Bluetooth connections. The chips also connect smart phones as well as other electronic devices to Wi-Fi connections. If Intel were to acquire Broadcom, the semiconductor maker would gain entry into a market that it has been struggling to find a toe-hold in – wireless handsets.
Intel has already bought out a number of companies in the last few years, including Altera for $16.7 billion and auto component and sensor maker Mobileye for $15 billion.
Despite the fact that these were just rumors, Broadcom shares saw an 8.3% spike, taking the company’s share price to $275 in extended hours trading.
According to Fortune, Intel is the largest of the three companies with a market cap of $244.2 billion. Broadcom is second, with a market cap of $109.6 billion and Qualcomm trails with a market value of $93.3 billion.
Since late last year, Qualcomm has been in a desperate fight to repel Broadcom’s hostile takeover bid. The company spurned multiple bids from its rival, the most recent of which was $121 billion, or $82 per share. The two main reasons for rejection that Qualcomm gave each time was that Broadcom was seriously undervaluing the company and that the bid would not pass regulations.
Earlier in the week, Qualcomm’s request to the US Committee on Foreign Investment (USCFI) for a review of the bid was accepted just a couple of days before the fateful shareholder meeting, where the fate of Qualcomm was to be decided.
Qualcomm was slated to have a shareholder meeting on March 6 to select a new board of directors. As a part of its hostile takeover bid, Broadcom had nominated 6 people to Qualcomm’s board. And early signs showed that chances of all the 6 nominees getting elected very extremely high. Had that happened, Qualcomm’s fate would have been sealed as the new board could have then voted to sell the company to Broadcom.
The intervention of the USCFI was a Godsend and has given the company a 30-day respite. The USCFI is currently investigating whether this deal would pose a threat to national security since Qualcomm was working on cutting edge technology with the US government.
Broadcom has said that it is cooperating with the US government in every way to ensure that the deal is safe.
Intel shares stayed pretty much flat even after the announcement, trading at $51.90 per share.