Qualcomm Workers Would Get Payouts If Broadcom Shakes Things UpBy
Employees would get payouts, protections if change of control
Broadcom would have to make payments based on tenure, roles
Qualcomm Inc., as it fights what would be the largest technology takeover, is guaranteeing that any acquirer would have to pay up if existing employees are fired after a corporate change of control.
The chipmaker unveiled a severance plan that applies to most employees below the rank of executive vice president if the company’s ownership changes, according to a Dec. 22 regulatory filing. The workers would get a payout if they are fired without cause or if they choose to leave for “good reason.” That would include a material reduction in their salary or a move of their main workplace to a location more than 50 miles away.
Qualcomm, the target of a $105 billion hostile takeover by rival Broadcom Ltd., also expanded its definition of a “change in control” to include a replacement of a majority of its board members, in addition to a sale.
A Broadcom representative said the company continues to hope that Qualcomm will engage with it regarding the offer. A representative for San Diego-based Qualcomm declined to comment.
After Qualcomm rejected the initial takeover bid, Broadcom is appealing directly to shareholders, asking them to elect new directors at the March annual meeting. The severance plan was made public 18 days after Broadcom nominated a slate of 11 replacements for Qualcomm’s board.
Qualcomm is describing the plan as a retention tool to ensure “the continued employment and attention and dedication to duty of its employees,” according to the filing. Eligible employees would get get a lump-sum severance payment based on their salary, rank and tenure. The amounts would range from at least four weeks of salary for lower-ranking workers to at least 52 weeks of salary for senior vice presidents, according to the filing. Senior employees would also get pro-rated annual bonuses.
The plan would make it more expensive for an acquirer to make sweeping changes to the structure of the organization -- something Broadcom Chief Executive Officer Hock Tan would likely pursue if the transaction is completed.
Tan has cut jobs and disposed of business units at the companies he’s acquired. As chief of Avago Technologies Ltd., he took over Broadcom Corp., ousted its CEO and spun off the wireless infrastructure and internet-of-things businesses in a matter of months to help create what’s now known as Broadcom Ltd.
Yahoo! Inc. deployed a similar severance policy in 2008 after Microsoft Corp. bid for the internet company, describing the plan as an attempt to keep employees and enhance shareholder value. Billionaire investor Carl Icahn, who was seeking control of Yahoo, slammed the policy, calling it a poison pill for a potential buyer. Yahoo scaled back the plan six months later to settle a shareholder lawsuit settlement over its decision to rebuff the buyout offer.
Broadcom on Nov. 6 offered $70 a share in cash and stock for Qualcomm, seeking to build a powerhouse that leads the market for wireless chips in devices like Apple Inc. iPhones. After rising as much as 0.7 percent, Qualcomm fell 0.1 percent to $65.22 at 3:34 p.m. Wednesday in New York trading. Broadcom fell 2.3 percent to $262.32.
(A description of the plan’s provisions was corrected in an earlier version of this story.)
— With assistance by Ian King