Broadcom Raises Its Qualcomm Offer to $121 Billion

Broadcom raised its takeover bid for the rival chipmaker Qualcomm to about $121 billion Monday, piling pressure on Qualcomm to agree to what would be the technology industry’s biggest-ever takeover and one that could affect the future of smartphones.

In offering $82 a share, up from about $70 previously, Broadcom raised the stakes a month before Qualcomm’s annual shareholder meeting, at which it hopes to unseat the entire board. The bid, according to Broadcom, is its “best and final” offer.

“Any rational board would consider what we’ve put forward,” Hock Tan, Broadcom’s chief executive, said by telephone.

Broadcom’s move would create a tech giant whose products would be used in nearly all of the world’s smartphones. Whether a deal goes ahead, however, remains an open question: Qualcomm’s leadership fiercely opposes it, while analysts have said that even if shareholders approved the deal, it could be rejected on antitrust grounds.

The battle underscores the growing importance of semiconductor technology to all manner of modern devices, even as the rising cost of developing computer chips winnows the number of producers to a well-heeled elite. Global chip sales surged 21.6 percent to $412.2 billion in 2017, the Semiconductor Industry Association said Monday.

Consumers have a stake in the contest, because Qualcomm is likely to be closely tied to the performance of future handsets — particularly a new generation of wireless technology called 5G — and prices that users may pay.

Qualcomm developed technology that became a foundation for all digital cellular communications, a position that allowed the company to both sell chips and charge a patent royalty for nearly all smartphones sold. That model generated an outsize flow of profits that Qualcomm poured into developing new generations of wireless chips, as well as microprocessors that handle calculations in mobile devices.

Those chips helped Apple turn the iPhone into one of the most lucrative products in high-tech history. But Qualcomm also helped South Korea’s Samsung Electronics and many Chinese competitors, which churned out a flood of low-priced iPhone rivals and made smartphones affordable to many more people. Apple sued Qualcomm a year ago, attacking patent licensing practices that have also been opposed by regulators in the United States, Europe and Asia.

Broadcom went after Qualcomm’s business model Monday in a voluminous set of slides, and has indicated it would seek to make peace with Apple, which is a major Broadcom customer for other types of wireless chips. But some major Chinese manufacturers have expressed concerns about the deal, reflecting Broadcom’s track record of cutting spending on research and raising chip prices. Samsung also now appears to be siding with Qualcomm, which last week announced a new patent deal with the South Korean company and Samsung’s agreement to stop opposing Qualcomm in court proceedings in the country.

Qualcomm’s management team and board have consistently argued that Broadcom’s takeover approach is opportunistic since it is unfolding during Qualcomm’s bruising legal fight with Apple, as well as priced too low.

But the revised offer may entice shareholders to demand that Qualcomm’s executives begin negotiations. Qualcomm reported a 96 percent drop in operating income last week, as Apple has refused to pay some licensing fees. It is also struggling to complete its own takeover bid, for the chipmaker NXP Semiconductor, amid pushback from investors of that company.

For Tan, who built Broadcom over nearly a decade from a series of takeovers, Qualcomm’s problems are ones that he and his team can fix — and that Qualcomm has not shown it can on its own.

“We have a lot of respect for the tech and the innovation that comes with the 5G technology,” he said. “But we believe, given our track record, we can do much more.”

Broadcom did more than raise its offer price Monday. It also pledged to pay a “significant” breakup fee if regulators veto a deal, as well as to pay additional cash if the two companies have not closed a transaction a year after announcement. It also committed to other steps to closing a transaction, including selling overlapping businesses.

Those moves are meant to highlight Broadcom’s commitment to the deal. Such assurances may prove important, given questions among analysts and investors over whether a combination could win regulatory approval.

Tan argued that Broadcom had held constructive talks with regulators around the world, and that his company had a track record of quickly closing deals. He also dismissed Qualcomm’s repeated concerns about antitrust issues.

“Based on what Qualcomm has been spinning the last six months, they’ve been short on specifics and heavy on rhetoric,” Tan said.

In a statement, Qualcomm said it was considering the new bid.

Broadcom also said that it would withdraw its offer if Qualcomm rescheduled its annual shareholder meeting from March 6, or if it paid more than the $110 a share that it has already bid for NXP.