Broadcom's new Qualcomm strategy: Nominate new directors for Qualcomm's board

Having had its recent takeover offer for Qualcomm rebuffed by its target's board, Broadcom Ltd. (NASDAQ: AVGO) has decided to see if it can replace that board. Broadcom says it will nominate 11 "independent, highly qualified individuals" (in the words of a Broadcom press release) as an alternative slate for election to Qualcomm's board of directors during Qualcomm's 2018 Annual Meeting of Stockholders March 6, 2018. The company says it plans to "propose certain other matters" as well that it did not specify.

Having had its recent takeover offer for Qualcomm rebuffed by its target's board, Broadcom Ltd. (NASDAQ: AVGO) has decided to see if it can replace that board. Broadcom says it will nominate 11 "independent, highly qualified individuals" (in the words of a Broadcom press release) as an alternative slate for election to Qualcomm's board of directors during Qualcomm's 2018 Annual Meeting of Stockholders March 6, 2018. The company says it plans to "propose certain other matters" as well that it did not specify. The move sparked an immediate backlash from Qualcomm's existing board.

Broadcom offered $70.00 per share in cash and stock for fellow chip maker Qualcomm on November 6 (see "Broadcom makes offer for Qualcomm"). The Qualcomm board rejected the offer a few days later (see "Qualcomm to Broadcom: Get lost").

"We have heard from many Qualcomm stockholders who have expressed their desire for Qualcomm to engage with us. We also continue to receive positive feedback from customers and, having had initial meetings with certain relevant antitrust authorities, remain confident that any regulatory requirements necessary to complete a combination will be met in a timely manner," said Hock Tan, Broadcom president and CEO.

"Although we are taking this step, it remains our strong preference to engage in a constructive dialogue with Qualcomm," Tan added. "We have repeatedly attempted to engage with Qualcomm, and despite stockholder and customer support for the transaction, Qualcomm has ignored those opportunities. The nominations give Qualcomm stockholders an opportunity to voice their disappointment with Qualcomm's directors and their refusal to engage in discussions with us. In light of the significant value our proposal provides for Qualcomm stockholders, we believe Qualcomm stockholders would be better served by new, independent, highly qualified nominees who are committed to maximizing value and acting in the best interests of Qualcomm stockholders."

Broadcom lists the 11 nominees in its press release. However, to "ensure continuity," Broadcom says it would support the re-nomination of three existing Qualcomm board members – Mark D. McLaughlin, Anthony J. "Tony" Vinciquerra, and Jeffrey W. Henderson – as directors within a larger board should its Qualcomm shareholders approve its slate.

Present Qualcomm senior management was not amused. "Qualcomm believes that this action is a blatant attempt to seize control of the Qualcomm Board in order to advance Broadcom's acquisition agenda. These nominees are inherently conflicted given Broadcom's desire to acquire Qualcomm in a manner that dramatically undervalues Qualcomm to Broadcom's benefit," said the company via a press statement.

In addition to asserting the Broadcom offer wasn't large enough, the statement also warned shareholders that the offer wasn't as solid as Broadcom would have them believe. "Broadcom and Silver Lake [a private equity firm that is backing Broadcom] are effectively asking stockholders to foreclose options and make a decision now on a non-binding proposed transaction which could not be completed for well over a year, if ever, given the magnitude of regulatory issues, the absence of commitments by Broadcom to resolve those issues, Broadcom's lack of committed financing, and the uncertainty surrounding its transition from Singapore to the United States," the statement reads.

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