Published: Thu, March 15, 2018
Research | By Derrick Holloway

Intel mulls possible takeover bid for Broadcom

Intel mulls possible takeover bid for Broadcom

Broadcom was an Irvine-based fabless semiconductor company that was acquired in 2016 by Avago Technologies, a company that began life as a product division of Hewlett-Packard, and was later spun off in 1999 into Agilent Technologies.

If it happens, however, it would continue an accelerating stream of mergers and acquisitions in the semiconductor industry.

Intel is watching the takeover battle closely and is eager for Broadcom to fail as the combined company would pose a serious competitive threat, the report said.

Broadcom has a market cap of around Dollars 104 billion, while Intel, the world's largest chipmaker, is valued at nearly USD 240 billion.

In recent years, Apple has shown an interest in moving away from Qualcomm as a partner and into using other companies including that of Intel.

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That deal was, of course, an order of magnitude smaller than the snaffling of Qualcomm. And meanwhile, the delay in the deal making as allows rumors to emerge that rival Intel is considering a bid for Broadcom. Intel past year bought a company called Mobileye, which develops sensors for autonomous vehicle features. The offer was quickly rejected, but that wasn't enough to put Broadcom's Hock Tan off: A hostile takeover attempt followed, and the pair have been dancing back and forth ever since.

CFIUS on March 4 ordered Qualcomm to postpone a shareholder meeting to vote on Broadcom's nominees to Qualcomm's board.

Among its concerns are that, by financing the acquisition with some $106bn in debt, Broadcom will be forced to slash R&D spend, namely in 5G technologies.

The fallout has left the deal of buyout open for everyone.

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The company also said it would create a $1.5 billion fund to train and educate engineers in the U.S.

The company is in the "final stages of redomiciling" and insists that "U.S. national security concerns are not a risk to closing, as Broadcom never plans to acquire Qualcomm before it completes redomiciliation". Nevertheless, the company has been preparing a range of fallback plans, including a possible acquisition of Broadcom itself. The move could minimize CFIUS' power, with the body regulating foreign investments.

"It is not entirely clear how establishing a USA domicile would affect CFIUS' view of its jurisdiction over the proposed transaction", Kirkland & Ellis LLP, a United States law firm not involved in the matter, wrote in a note to clients on Friday. Royal Bank of Canada raised their target price on Broadcom from $300.00 to $315.00 and gave the company a "top pick" rating in a report on Monday, November 20th.

Finally, Qualcomm's attempted acquisition of NXP also faces regulatory hurdles - mainly in China.

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