The Battle for QUALCOMM, Inc.: A Poison Pill Pulled Out


This morning, Broadcom Ltd (NASDAQ:AVGO) raised its bid for its rival chipmaker QUALCOMM, Inc. (NASDAQ:QCOM) from $70 to $82 per share (valuing Qualcomm at ~$121 billion), piling on pressure for Qualcomm to agree to what would be the biggest-ever takeover in the technology industry. Broadcom raised the stakes a month before Qualcomm’s annual shareholder meeting, at which it hopes to unseat the board with its “best and final” offer.

“Broadcom may have just handed Qualcomm a “poison pill,” said Susquehanna analyst Christopher Rolland. “With the deal contingent upon NXP at $110 or not at all, Qualcomm’s Board of Directors can hinder the potential of a takeout by raising the bid for NXP, closer to the $135 value that NXP activists have been pushing for. Additionally, the deal is contingent upon Qualcomm not delaying or adjourning its annual shareholders meeting past March 6, 2018.”

Rolland continued, “We are surprised by the one-year timeline and still think significant regulatory risk remains. Broadcom is confident the proposed transaction will be completed within approximately one year of the deal’s signing and is willing to provide a “regulatory ticking” fee, increasing the cash consideration to Qualcomm if the deal is not consummated by the one-year anniversary. In addition, the company is prepared to pay Qualcomm a “significant” reverse termination fee if the deal does not achieve regulatory approval. We still think significant regulatory risk remains and think the one-year timeline could prove aggressive.”

Rolland rates QUALCOMM shares a Buy with a price target of $78, which implies a potential upside of 24% from today’s closing price. (To watch Rolland’s track record, click here)

According to TipRanks, a site that tracks and ranks analysts on their predictions, the Street seems to be divided on the stock as 9 recommend buying shares of QUALCOMM , while 7 remain on the sidelines. The average 12-month price target between these 16 analysts is $92.15, marking a 50.47% potential upside from current levels.