Photographer: Brent Lewin/Bloomberg

Qualcomm Urges Rejection of Broadcom's Board Nominee Slate

Updated on
  • Candidates are part of Broadcom’s $105 billion hostile offer
  • Qualcomm details communcation with suitor in new proxy filing

Qualcomm Inc.’s board is opposing the nomination of 11 new directors by Broadcom Ltd. as of part its $105 billion hostile offer for the chipmaker.

Broadcom’s nominees are inherently biased in favor of the bid, which undervalues Qualcomm and wouldn’t bring the skills needed to run the company during a lengthy regulatory approval process, the San Diego, California-based chipmaker said in a statement Friday.

Qualcomm has rejected Broadcom’s initial $70-a-share bid, an offer its Chief Executive Officer Steve Mollenkopf said “isn’t even in the ballpark.” Broadcom persisted and nominated the candidates for a vote at Qualcomm’s annual stockholder meeting in March, in a direct appeal to shareholders.

Qualcomm’s governance committee concluded Broadcom’s nominees are "inherently conflicted and would not bring incremental skills or expertise,” the statement said.

Broadcom is trying to pull off what would be the largest technology deal ever. Tough-negotiating CEO Hock Tan has been the driving force in a wave of consolidation that’s swept through the $300 billion semiconductor industry over the past three years, more than doubling the size of his company. He’s managed to negotiate friendly deals so far.

Reshaping Chipmaking

The Qualcomm offer is part of Tan’s push to reshape chipmaking. He wants Qualcomm’s industry-leading phone-chip technology to add to his growing collection of “franchises” -- technology capabilities that he believes are becoming increasingly important to makers of electronics.

By nominating new directors, Broadcom is challenging Qualcomm’s existing board and management team to come to the bargaining table or explain to shareholders why the biggest maker of mobile-phone chips is better off staying solo.

Yet the transaction wasn’t always assumed to be a Broadcom takeover, according to a proxy filing Friday by Qualcomm that outlines communications between the two parties. During an August 2016 meeting brokered by Silver Lake partner and Broadcom board member Ken Hao, he and Tan outlined several potential transaction structures to Mollenkopf. The "presentation indicated that the more attractive transaction was to have Qualcomm acquire Broadcom," the filing said.

A month later, Hao and Tan met with Mollenkopf again to further discuss their views on a potential combination. Then Broadcom and Silver Lake went quiet, the Qualcomm filing says. Tan next contacted Mollenkopf, "indicating in a non-specific way that Broadcom was available to talk about transactions," days after the U.S. Federal Trade Commission and Apple Inc. filed separate antitrust suits in January against Qualcomm.

‘Substantive Contacts’

Mollenkopf didn’t have any "substantive contacts" from Broadcom or Silver Lake until Nov. 5 -- two days after Bloomberg broke news of a potential offer -- when Tan called to inform him that a letter would be sent to Qualcomm’s board laying out the hostile bid.

All the while, Qualcomm had been engaged in another takeover effort. Two months prior to the initial meeting with Tan, Qualcomm’s Mollenkopf informed the CEO of NXP Semiconductors NV that he was interested in acquiring the company as a whole. That $47 billion deal was announced in October and has yet to close, pending regulatory approval and NXP’s shareholders agreeing to tender 80 percent of their holdings.

Qualcomm shares rose less than 1 percent to $64.58 at 10:08 a.m. in New York. Broadcom was little changed at $262.44.

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