Qualcomm rejects $130B Broadcom bid

Largest ever tech takeover 'significantly undervalues' chipmaker

Qualcomm also said the transaction may face regulatory scrutiny that would cast doubt on its completion.

This is just a minor hiccup for Broadcom, which is expecting to now escalate a proxy battle by appealing directly to Qualcomm shareholders.

"It is the board's unanimous belief that Broadcom's proposal significantly undervalues Qualcomm relative to the company's leadership position in mobile technology and our future growth prospects", Paul Jacobs, Qualcomm's executive chairman and chairman of the board, said in an official statement released Monday. Indeed, insiders had suggested that the company had considered offering as much as $80 per share in its opening bid - implying that it has room and resources to dramatically raise its offer. Still from these sources, it is said that Qualcomm CEO Steven Mollenkopf has spent the past few days soliciting feedback from Qualcomm shareholders.

Shares of Qualcomm were up 1.8 per cent at $65.74 in early afternoon trading, while those of Broadcom were down 0.4 per cent at $263.95. "We would not make this offer if we were not confident that our common global customers would embrace the proposed combination". If it does sell to Broadcom, it means the combined businesses' chips will be present in more than a billion smartphones sold every year.

"Qualcomm shareholders are likely to hold out for more, but we believe something in the $80-ish range is likely enough to bring a lot of them around", Stacy Rasgon, an analyst at Sanford C. Bernstein wrote in a note published over the weekend.

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According to sources familiar with the ongoing deliberations, Qualcomm's board of directors could meet over the weekend to decide on what steps to take regarding Broadcom's unsolicited acquisition offer.

The San Diego-based chipmaker announced on Monday that it was passing on the acquisition, which Broadcom actually valued at $130 billion taking Qualcomm's $25 billion debt into account. That purchase is being held up by regulatory approval.

According to Reuters, Broadcom could increase its offer to up to $90 per share.

Through its proposal, Broadcom sought to conduct the second-largest deal in American corporate history.

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