Investment

In the history of the largest technology mergers and acquisitions “last minute” counter-attack

March 6, 2018, the United States Qualcomm shareholders meeting, is known as the history of the largest technology mergers and acquisitions Casey acquisition of Qualcomm case of a positive battle. However, only one day before the holding of Qualcomm shareholders ‘meeting, Qualcomm broke the probe on the morning of March 5 in the United States to accept the investigation by the U.S. Foreign Investment Commission (CFIUS). CFIUS therefore ordered Qualcomm to defer its shareholders’ Triggered the market uproar.

Figure 丨 US Foreign Investment Commission (CFIUS)

Broadcom also said it was surprised by Qualcomm’s acceptance of CFIUS just moments before the shareholders’ meeting. Qualcomm responded to the refute that Broadcom should not be surprised because Broadcom had already filed two written filings with CFIUS several weeks earlier.

This mergers and acquisitions case attention not only because of the scale, but also because the merger from November 2017 until now, both sides offensive and defensive plot along the way, almost can be called the most classic than the United States in the history of mergers and acquisitions The Barbarian at the Gate battle, whether it be the Golden Parachute or the Poison Pill strategy, can be seen in the offensive and defensive takeovers between Qualcomm and Broadcom.

However, the previous few offensive and defensive down, Qualcomm and Broadcom each other, but also did not really change the situation, the case of mergers and acquisitions actually in fact already deadlocked, leaving only one way is to face the confrontation at the Qualcomm shareholders meeting. Originally held on March 6 Qualcomm shareholders meeting, Broadcom plan is to nominate six board members, such as Broadcom can be 11 seats in the Qualcomm board to occupy a majority of the seats, and then get the lead through the acquisition.

It is noteworthy that although in early March, Qualcomm released news that as one of its top 30 shareholders Parnassus Endeavor Fund, has decided to vote for Qualcomm’s nomination of director candidates to support Qualcomm’s existing company to send . However, if the calculation of time, Qualcomm announced the news at the same time, Qualcomm has actually started at the same time also started to the United States CFIUS willingness to accept the intention of the survey.

In the past few years, most impressions of CFIUS have been at the meritorious role of Chinese companies in the acquisition of U.S. companies. The merger of many Chinese companies, from Huawei to Ziguang, to the acquisition of U.S. companies ended in a CFIUS intervention . This time, however, CFIUS’s arrow points to Broadcom, a Singapore company registered in the United States, whose assets, people and operations are major companies.

Figure 丨 CFIUS became the topic of Sino-US business transactions can not be separated

In fact, Broadcom officially submitted to Qualcomm in November 2017 before the proposed offer, a Broadcom CEO Hock Tan meeting with Trump occasions, Hock Tan has said on the spot, Broadcom headquarters will be moved from the current Singapore to the United States, In response to Trump’s U.S. priority.

However, Broadcom headquarters moved back to the United States will be in May 2018, before that Broadcom is not a U.S. company, the acquisition of Qualcomm’s proposal will have to be CFIUS’s review.

The CFIUS received Qualcomm said it was willing to accept the investigation, asked Qualcomm to be scheduled for March 6, the shareholders meeting to be delayed by one month, the next month’s survey will focus on rival Broadcom, this investigation will be up to 1420 Whether the $ 800 million acquisition of a high price would threaten the national security of the United States.

Figure 丨 Qualcomm is located in San Diego’s headquarters

This move can be described as very abnormal, and even the news that as early as the two companies began to discuss the acquisition of the joint venture, the United States Foreign Investment Committee has maintained its concern and intervention. The political high-pressured air, which was suddenly raised by the incident, also started to spread everywhere. There was a more rigorous examination of Broadcom’s next move.

Broadcom is extremely dissatisfied with the company then made a public statement on the morning of March 5 in the United States, accusing Qualcomm of the move just a meaningless resistance, and Broadcom has agreed to the U.S. government’s request to move the headquarters back to the United States, the entry into force The day will be in May, when the Foreign Investment Commission of the United States leaves no room for beating in the merger.

CFIUS is made up of representatives from the Ministry of Finance and the Ministry of Justice. Perhaps it is long ago expected government agencies will intervene in the acquisition, so some analysts have long said that the acquisition is not optimistic that even Qualcomm shareholders agreed to the tender offer, the case is still likely to be antitrust reasons to be Prohibited.

In any case, the involvement of the U.S. Foreign Investment Commission did get a one-month grace period for Qualcomm. In the middle of this month, Qualcomm still had more time to strategically deploy anti-mergers. After all, Broadcom moves from the end of 2017 to the end of 2017 Blitz actually let Qualcomm a little parry.

In order to protect their property from malicious mergers and acquisitions, Qualcomm can be said to have done all kinds of moves, except as early as the end of 2017 to declare the current 11 board of directors continue to stand, and Broadcom proposed candidate confrontation, but also by raising the offer At the same time, we jointly phoned partners to resist Broadcom’s merger and acquisition. In addition, we also formulated a huge amount of compensation, planned stock repurchases to raise the stock price and substantially raised the performance targets in FY2019. Back, however, Broadcom boss Hock Tan is not a good mess, in addition to profit, along the Qualcomm momentum to raise quotes, but also increased the case of mergers and acquisitions once failed to pay Qualcomm brokerage amount, hoping to take this Qualcomm shareholders can impress the mind.

Hock Tan’s practice has also proved quite effective, part of Qualcomm shareholders defeat to support Broadcom’s party.

Figure 丨 Broadcom CEO Hock Tan

But then in order to fight back through Broadcom, Qualcomm increased the purchase price of NXP, but this move Broadcom extremely dissatisfied, cut the purchase price of 4%, expecting to stand by Qualcomm Broadcom shareholders pressure, forcing Qualcomm to Fanlv. Until the end, Qualcomm said that if Broadcom proposed 90 US dollars per share, the overall 160 billion acquisition price, are happy to consult with Broadcom on the merger. Qualcomm’s move, it seems, first to appease the dissatisfaction of existing shareholders, but in fact it has begun brewing CFIUS shot the last resort intervention.

In November last year, Broadcom first proposed 130 billion US dollars acquisition of Qualcomm’s plan, and the deal once completed, will become the largest in the history of a semiconductor transaction case, the integration of the new company will also become Intel and Samsung After the world’s third largest semiconductor company.

From a deeper perspective, the two-way mergers and acquisitions also revealed some changes that are taking place in the semiconductor industry, that is, with the advent of more and more electronic devices, the demand for semiconductor chips will be higher and higher , The global chip sales exceeded $ 410 billion last year alone. With the increasing demand for computing power, fewer and fewer companies are able to produce high-performance chips and Broadcom exits the baseband market Inadequate access in areas such as cell phones, in-vehicle communications and IoT has also created an obstacle to the long-term growth of the company.

On the other hand, Hock Tan is very good at splitting up the profit-making M & A business units for profit. Considering that Qualcomm has a large number of departments, but the real profit is small. However, its technology base and patent library are quite profound. Split sale certainly can get a lot of benefits. The patent and business part of the split, but also a considerable degree of reduction monopoly disputes.

More noteworthy is Broadcom’s strong mergers and acquisitions behind, whether it also represents the interests of customers, including Apple, which is the focus of continuous observation. Although Qualcomm moved out of CFIUS as a rescuer at the last minute and hopes to gain more space over time, CFIUS will certainly inquire about its actual market competition and operating conditions, including its customers and competitors during the investigation People, therefore, whether Apple or other business attitudes toward this merger may also become a factor affecting the CFIUS findings.

A month’s time is actually not long, Qualcomm has been very difficult to have a new move to deal with Broadcom, if the move out of the United States government does not work this move, the fate of Qualcomm may also doomed to change. And finally the key is that Qualcomm for the United States in terms of its degree of importance, after all, the baseband technology can be said that the military strategist, the relevant patent can be said that the national strategic level of assets, this is not a simple business M & A behavior can be bought and sold things.

On the other hand, even if Broadcom is not able to complete the acquisition due to regulatory constraints, it is not impossible for Broadcom to resume its headquarters after it relocated its headquarters to the United States, although this may take a year or more time. But one thing must be pondered is that if a year later, Broadcom comeback to acquire Qualcomm, the price will be higher than it is now? Or low? Postponed Broadcom acquisition, in terms of Qualcomm, will be a good thing? Or bad?

This month for Qualcomm, may be time for space buffer, but to see in the eyes of some industry people, but also think this month but can let Broadcom calm down to think about opportunities, after all, in the high pass for some time Counterattack, whether it is to raise the cost of repatriation programs, or to increase the price of the acquisition of NXP, let Broadcom acquisition of Qualcomm increased risk for Broadcom, the same time in exchange for space, even if Broadcom in the Qualcomm shareholders meeting It is not necessarily a bad thing for Broadcom to successfully win over half of the board seats, or because of other regulatory reasons, unable to complete the acquisition. Because one year later, Qualcomm’s value will be higher than it is now? Broadcom acquisition of Qualcomm case so far, this month may be an unexpected turn, but it may also be a key turning point.