Broadcom Seeks to Oust Qualcomm Board

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Broadcom Ltd. (NASDAQ: AVGO) on Monday morning announced that it intends to nominate a slate of 11 people for election to the 11-member board of directors of Qualcomm Inc. (NASDAQ: QCOM). Broadcom plans to file notification with the U.S. Securities and Exchange Commission, along with a proxy card, in connection with Qualcomm’s scheduled March 6 annual meeting.

Broadcom also said it intends to propose “certain other matters” for consideration by Qualcomm shareholders, but the company did not provide details.

Broadcom offered on November 6 to acquire Qualcomm for $70 in cash and stock. A week later, Qualcomm’s board unanimously voted to reject the offer, claiming that it undervalued the company. Broadcom said its offer stands whether or not Qualcomm is successful in its $110 per share offer for NXP Semiconductors N.V. (NASDAQ: NXPI).

In the announcement, Broadcom CEO Hock Tan said:

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.

Broadcom said, if its slate is elected, it would support expansion of Qualcomm’s board to 14, to include current board members Mark D. Laughlin, Anthony J. “Tony” Vinciquerra and Jeffrey W. Henderson.

When Broadcom’s offer was first announced, Wall Street analysts mostly liked the deal although there was some skepticism that it would pass regulatory muster. Another recent wrinkle is the demand from some NXP shareholders to boost Qualcomm’s offer for the firm from $110 to $125 or more. Among the disgruntled shareholders is Paul Singer’s Elliott Management, which owns about 4.9% of NXP’s outstanding shares.

Interestingly, Broadcom said that its offer for Qualcomm was still good at $110 per share for NXP. If Qualcomm boosts its offer to, say, $125, does Broadcom rescind its offer or sweeten it?

Broadcom stock closed Friday down about 2.3% on the day to $271.56, in a 52-week trading range of $162.40 to $285.68. The stock’s 12-month consensus price target is $293.93. Shares were inactive in Monday’s premarket session.

Qualcomm shares closed down about 1.3% Friday, at $65.49, and traded up two pennies in Monday’s premarket. The stock’s 52-week range is $48.92 to $70.42, and the consensus 12-month price target is $64.40.

NXP traded flat in Monday’s premarket after closing up 1.2% on Friday, at $114.78 in a 52-week range of $96.00 to $118.20.