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Qualcomm's Sweetened Offer for NXP Prompts Broadcom Rebuke

Qualcomm Increases Offer Price for NXP to Win Support

(Bloomberg) -- Qualcomm Inc. raised its offer for NXP Semiconductors NV and cut a deal with investors who had been threatening to hold up the transaction -- prompting a sharp response from its own hostile suitor Broadcom Ltd.

Qualcomm’s sweetened offer of $127.50 a share -- 16 percent more than the previous price -- was enough to secure support from holders, including activist Elliott Management Corp., of about 28 percent of NXP’s stock. It removes the opposition of a crucial block of shareholders who have piled into the stock demanding a higher price.

But Broadcom has long said its $121 billion bid for Qualcomm is contingent on the NXP deal going through at the originally agreed price. On Tuesday Broadcom said the revised offer for NXP to an equity value of about $43 billion is well beyond what Qualcomm has repeatedly characterized as a “full and fair” price.

“Broadcom believes the price increase demonstrates the Qualcomm board’s disregard for its fiduciary duty to maximize value for Qualcomm stockholders,” the company said a statement following the Qualcomm announcement.

Qualcomm has twice rejected Broadcom’s approaches -- prompting its would-be suitor to nominate board members and appeal directly to shareholders in a March 6 vote. By going ahead with the NXP purchase at all, Qualcomm has ignored what Broadcom negotiators requested at a meeting last week, according to a person familiar with their talks. Broadcom’s representatives said they wanted to acquire Qualcomm with its cash reserves intact, rather than have Qualcomm use that cash to buy NXP, said the person.

For Qualcomm, getting the NXP deal resolved removes one of the uncertainties around its future that have stoked investor concern and depressed its stock price.

“We thought our shareholders wanted certainty on this,” said Tom Horton, Qualcomm’s lead independent director. “Whether we pursue a Broadcom deal or not, Qualcomm is just that much stronger, that much more profitable.”

Broadcom said it’s now considering its options.

Still, Sanford C. Bernstein & Co. analyst Stacy Rasgon says Broadcom is unlikely to bail.

“We don’t think they toss it and walk though,” he wrote in a note on Tuesday. “We would hope for further engagement between the two companies, though their sit-down together last week does not appear to have been incredibly fruitful so we aren’t holding our breath.”

NXP shares rose 6.1 percent to $125.71 at 12:39 p.m. in New York. Qualcomm fell 2.3 percent to $63.34. Qualcomm also said NXP agreed to a new investor threshold to win approval for its purchase: 70 percent of holders down from 80 percent previously.

Qualcomm executives raised the offer price because the Dutch company’s earnings have improved ahead of expectations in the more than a year it has taken the transaction to work through regulatory approval, the San Diego-based company said Tuesday in a statement.

The deal, which would be the largest tech takeover in history, is aimed at jump-starting Qualcomm’s efforts to expand its industry-leading mobile phone technology into new markets such as automotive. 

Elliott, which owns a 7.2 percent stake in NXP, had previously said it believed the company’s standalone value was $135 a share. On Tuesday, the New York-based hedge fund said it had entered into an agreement to support the new transaction.

Broadcom Chief Executive Officer Hock Tan has said the takeover of NXP won’t solve Qualcomm’s problems, and he wants it to focus on what it’s good at. How much he’s prepared to pay may determine whether he gets the chance to run it. Qualcomm’s board is convinced that it’s worth more than $82 a share.

“It’s just not in the ballpark,” Horton said of Broadcom’s offer. “If it is best and final, I’m not sure how we bridge that gap.”

Qualcomm, whose modem chips connect the majority of the world’s largest smartphones to cellular networks, said the deal for NXP has won approval from eight of nine required government regulatory bodies. Approval is still needed from China’s ministry of commerce. Qualcomm said it’s “optimistic” it will receive clearance in the “near term.”

--With assistance from Scott Deveau

To contact the reporters on this story: Ian King in San Francisco at ianking@bloomberg.net, Adam Satariano in London at asatariano1@bloomberg.net.

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Andrew Pollack, Alistair Barr

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