Broadcom on Monday proposed what would be the largest ever takeover in the technology sector, offering $130 billion to acquire rival Qualcomm in a high-stakes bet on the networking technology used to power internet-connected devices.
Broadcom’s $70-per-share proposal represents a 28% premium over the undisturbed closing price of Qualcomm’s stock on Nov. 2. If the deal were to go through, it would create the world’s third-largest chipmaker, behind Intel and Samsung.
“This complementary transaction will position the combined company as a global communications leader with an impressive portfolio of technologies and products,” Broadcom CEO Hock Tan said in a news release, adding that the combined company would “deliver more advanced semiconductor solutions for our global customers.”
On news of the proposal, Qualcomm shares rose 1.8% to $62.95 while Broadcom stock fell 0.8% to $271.48. According to The Financial Times, Qualcomm is set to reject the offer, with one person close to the company saying it was significantly below what the board would consider seriously.
As The Verge reports, the semiconductor industry “has been gripped in recent years by a mania of mergers and acquisitions” as computing power has shifted from PCs and smartphones to a world of self-driving cars and the “Internet of Things.”
Other recent deals have included Softbank’s $31 billion purchase of chip designer ARM and Intel’s $16.7 billion acquisitionof Altera. Qualcomm itself has agreed to buy NXP Semiconductors for $39 billion.
Broadcom provides designs for Wi-Fi and Bluetooth chips, as well as industrial infrastructure products. Analysts said a takeover of Qualcomm would give it the networking technology it needs to power internet-connected devices.
“Net net, Broadcom needs LTE and 5G capability that they don’t have today,” Patrick Moorhead, analyst at Moor Insights & Strategy, told the FT.
As of last Friday, Qualcomm’s market capitalization was $91 billion while Broadcom was valued at $112 billion. “Qualcomm’s mobile processors and modems, backed by a strong portfolio of intellectual property that underpins cellular communications in most modern mobile phones, have left it well placed as 5G rollout begins in the next few years,” the FT said.