If regulators block the acquisition offer of up to $146 billion, Broadcom will provide Qualcom with a $8 billion break-up fee, which will also be the second largest break-up fee in history.
According to two informed sources, the two companies will meet on Tuesday for the first time, which will open up a narrow path for the largest technology transaction in history.
Broadcom, which is headquartered in Singapore, said that if the transaction fails to obtain regulatory approval, the company will pay up to $8 billion in break-up fees to Qualcomm. On this day, American chip maker Qualcomm opened the door for negotiations with Broadcom, despite rejecting its offer of $82 per share.
Broadcom reiterated that its latest offer is the "best and final" offer, and that the break-up fee is still higher than usual, and the cash portion of the annual 6% of the cost of quotes, designed to allow Qualcomm to rest assured that the company has confidence in the completion of the transaction. This $8 billion break-up fee represents approximately 6.6% of the value of this $121 billion traded stock, which is higher than the typical break-up fee of less than 5%.
Qualcomm decided to give Broadcom’s merger chief executive Hock Tan an opportunity, which is also the first sign of San Diego-based Qualcomm’s potential deal to loosen up.
The key issue is whether Tan's guarantee will convince Qualcomm's board of directors that mergers to create leading companies in the semiconductor industry will win regulatory approval.
Paul Jacobs, Chairman of Qualcomm’s Board of Directors, said in a Thursday letter: “If Qualcomm reached a merger agreement and the transaction is not reached after an extended regulatory review period, Qualcomm will suffer. Huge and irreversible damage."
People close to Qualcomm said that higher than usual break-up costs will not be enough to allow them to reach an agreement.
Jacob wrote: "We are ready to meet with you to explain how you will bridge these gaps in value and transaction certainty, and to better understand the outstanding issues in your proposal."
Qualcomm’s euphemism was the latest turning point in this dramatic acquisition that lasted several months. Before Broadcom submitted an unsolicited bid to Qualcomm, Qualcomm subsequently refused to underestimate the company’s value.
On Monday, Broadcom made a comeback with more attractive offers, raising its purchase price by about 17% to $146 billion, including $25 billion in debt, in an attempt to bring a decisive blow to the company.
This offer quotes a 54% premium to the average share price in the 30 days prior to the acquisition. The new proposal also includes an undisclosed “transaction fee†for Qualcomm investors if the transaction is not completed within one year of the announcement.
Qualcomm shareholders will hold a meeting on March 6 to vote on Broadcom's support proposal. If the proposal is successful, it will pave the way for an agreement.
Prior to this, Qualcomm warned that if the company accepts Broadcom’s $121 billion acquisition proposal, it may lose two major customers. Qualcomm also stated that the transaction could not be approved by the regulatory authorities.
Qualcomm said that the two customers who provide more than one billion US dollars in chip revenue have already indicated that if the transaction is completed, they will abandon Qualcomm because they do not believe that Broadcom can continue to lead the development of technology.
Qualcomm listed Apple, Samsung Electronics as important customers. In addition, Qualcomm's other customers include Huawei, LG Electronics, OPPO, Sony, vivo, and Xiaomi, all of which manufacture smartphones.
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