Broadcom is set to take its first formal step toward a hostile bid to take over Qualcomm, unveiling nominees whom Qualcomm shareholders can vote on to replace the US semiconductor company's board of directors, according to people familiar with the matter.
Broadcom's move comes after Qualcomm rejected its US$103 billion cash-and-stock bid last month. Qualcomm shareholders who want the company to engage in sale talks will be able to vote on Broadcom's board director slate on 6 March.
Broadcom has lined up nine men and two women as board director nominees, many of whom have considerable experience in the technology sector, the sources said. Private equity firm, Silver Lake, an investor in Broadcom, has helped with the effort to recruit the nominees, the sources added.
Broadcom will not be unveiling any new offer for Qualcomm on Monday, the sources said. However, it has been considering an improved bid, and will likely present it by March, based on the reception its board director slate receives from Qualcomm shareholders, the sources added. Last month, Broadcom was considering raising its offer by offering more of its own stock.
The sources asked not to be identified because the deliberations are confidential. Broadcom and Qualcomm declined to comment.
The board director slate that Broadcom puts forward will be heavily scrutinised, because its nominees will not just be asked to put Qualcomm up for sale, but will have to oversee the company until a deal with Broadcom closes.
Broadcom has said regulators may take a year to approve an acquisition of Qualcomm, while Qualcomm has countered that the regulatory review process globally could last much longer and is fraught with risks.
Qualcomm is also engaged in a patent infringement dispute with Apple. Unless that legal spat is resolved in the next few months, Broadcom's board director nominees will have to oversee the resolution of that issue as well.
Qualcomm is also trying to close its US$38 billion acquisition of automotive chipmaker, NXP Semiconductors, after signing a deal in October 2016. Broadcom has indicated it is willing to acquire Qualcomm irrespective of whether it closes the NXP deal.
NXP shares have been trading above Qualcomm's US$110-per-share offer price, as many NXP shareholders, including hedge fund Elliott Management Corp, have been holding out for a better price. The spread has tightened, however, in the past month. NXP shares ended trading on Friday at US$114.78.
Qualcomm does not need to decide to raise its offer for NXP until that deal receives antitrust clearance from all the regulators reviewing the deal around the world.
(Reporting by Liana B. Baker and Greg Roumeliotis in New York; Editing by Peter Cooney)