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Refused Broadcom 100 billion acquisition of Qualcomm in addition to less money but also worried about what

via:CnBeta     time:2017/11/15 7:01:31     readed:124

Broadcom's current CEO, Hock Tan, immediately said he would not give up the merger. "We still think the proposed offer is the most attractive to Qualcomm shareholders, and we are encouraged by their reaction, many of them The shareholders have already expressed to us the intention of Qualcomm to discuss the tender offer with us. "

Many insiders who understand the operation of such a merger said to CBN reporter that it is still hard to tell whether Qualcomm's response was to face the crisis in its foreign stance or to shareholders' true beliefs. "After all, capital and people are as unpredictable "

However, Qualcomm also mentioned in the response "take into account the uncertainty of follow-up regulation." Obviously, the merger with a total value of more than one hundred billion U.S. dollars will inevitably be the focus of antitrust authorities.

Broadcom "Wai hunting" Qualcomm

About a week ago, American communications semiconductor chip company Broadcom suddenly submitted a tender offer to Qualcomm, causing great concern both inside and outside the industry.

From the physical strength and technical point of view, both comparable. In information technology research and analysis company Gartner's 2016 semiconductor industry revenue rankings, Broadcom ranked fifth, Qualcomm third. In addition, the two companies are the world's leading mobile Internet processor companies and communications ground floor patent overlord, are also the Internet of things chip companies.

Wang Xuan, who once worked for Broadcom, told CBN reporter that Chen Fuyang is by no means a fuel-efficient lamp. He has long said that he is not a person in the semiconductor circle, but he knows how to play the report. "After Chen Fuyang bought Broadcom Direct price 25%, if the customer does not agree directly out of stock.Huawei such a big customer, also be required to order the next year ahead of schedule in order to ensure the availability of the old price.

From Broadcom's response can also find that the lines between the lines still revealed a high degree of confidence. Broadcom said Moelis & amp; Company LLC, Citibank, Deutsche Bank, JP Morgan Chase, Merrill Lynch and Morgan Stanley are both Broadcom financial advisors and are represented by Wachtell, Lipton, Rosen & Katz (top ranked law firms in the world) and Latham & Watkins LLP (Swiss International Law Firm) acted as legal counsel.

Of course, in addition to the help of capital, Broadcom's self-confidence also comes from Qualcomm's own predicament.

Wang Xuan told CBN reporter that Qualcomm's board of directors, representing the interests of management, rejected the offer as expected. But Qualcomm's ownership structure is very fragmented, almost in front of the fund. He believes that in Qualcomm's lawsuit, performance decline, Broadcom is spotted the fund managers have a good attitude to close, it was a high profile shot.

Qualcomm Broadcom and the top 25 major shareholders in 17 coincide (Source: DeepTech deep technology)

QUALCOMM's FY2017 fiscal fourth quarter and fiscal year earnings report, Qualcomm fourth-quarter revenue of 59 billion US dollars, down 5%; net profit of 168 million US dollars, a year earlier decline of 1.599 billion US dollars 89%. And from FY17, Qualcomm's total revenue was 22.291 billion U.S. dollars, a year-on-year decrease of 5%; its net profit was 2.465 billion U.S. dollars, down 57% over the same period of last year.

And from the outside, Qualcomm's business model is being challenged.

"Qualcomm's previous business model, arguably the high cost of research and development subsidized by large royalties, has led the way in technology, but the model is being challenged by major corporations and governments everywhere, According to the overall price of mobile phone charges, even if the phone's Qualcomm chip only a small part of the overall cost. "Intellectual property information service provider wisdom bud analyst Chen Zihao told First Financial said that from a few years ago, Qualcomm began to be around the government In the name of unfair trade sanctions, after the sanctions, Qualcomm's patent revenue also declined, and its lawsuit with Apple also affected several quarters of Qualcomm's performance.

First Financial reporters combed that in 2014 for Qualcomm is a watershed. In fiscal year 2014, Qualcomm reported revenue of $ 26.5 billion and net profit of $ 7.97 billion. Since then, Qualcomm revenue has been declining, down to 22.391 billion US dollars in FY17. Net income was $ 5.3 billion in FY 2015 and a slight increase to $ 5.7 billion in FY16 before declining to $ 2,465 million in FY17.

"In fact, the fundamental reason for accelerating the acquisition of the semiconductor industry is the decline in gross profit, high-tech star about to become common parts suppliers." Wang Xuan told reporters that the pursuit of economies of scale in the pursuit of even the star Enterprise Qualcomm may also be encountered The fate of the acquisition, "Qualcomm products are too single, too focused business, which is Broadcom saw the opportunity."

"For Qualcomm, being acquired may not be a bad thing. Qualcomm technology development and business models are now blocked everywhere, if we can merge with Broadcom, the macro form will be in the capital markets in all directions." Chen Zihao on the first financial reporter, Broadcom for The acquisition of Qualcomm is a must, and Broadcom's experience and operations in the capital markets could easily raise its bid to $ 80 or $ 90 a share, pushing the deal's final buy-in price to more than $ 150 billion.

Semiconductor into the giant integration period

After 2000, the development of the semiconductor industry has slowed down. Hock shared the future development of the semiconductor industry a few days ago that the next decade, the semiconductor is likely to integrate into the vertical integration from the horizontal integration.

In fact, with the performance decline, the semiconductor industry has been staged during the two years of rapid mergers and acquisitions.

According to a report recently released by the International Semiconductor Industry Association (SEMI), in 2015, M & A transactions by semiconductor companies exceeded 600 billion U.S. dollars, and may reach 116 billion U.S. dollars and 93 billion U.S. dollars in 2017 respectively. The association said 2016 appears to be the peak of the M & A spree. These mergers and acquisitions are mainly in the mature market to increase the scale and competitiveness.

More than 60 mergers and acquisitions were announced in 2016, 49 of which ended in the same year. Three of these transactions accounted for more than 75% of the total annual M & A transactions, including Avago's acquisition of Broadcom for $ 37 billion (currently the same name Broadcom acquired for the acquisition of Avago); Softbank acquired $ 32 billion for acquisition of semiconductor intellectual property Business ARM Holdings; Western Digital Acquired Sandisk for $ 19 Billion.

SEMI said it expects 12 transactions in the global semiconductor industry to be completed in 2017, worth more than 93 billion U.S. dollars. The largest deal for acquisitions in 2017 is expected to be a $ 47 billion deal between Qualcomm and NXP Semiconductors, the largest M & A deal in Qualcomm's history; the second-highest-value deals are AnalogDevice Inc. and Ling Linear Technology Group (148 million U.S. dollars) between the transaction. Only these two transactions accounted for 66% of the total global transactions in 2017.

The association said that over the years, equipment and materials suppliers in the semiconductor supply chain M & A activities have been carried out. With the consolidation between equipment makers, foundries and fabless manufacturers, further price pressures and tougher negotiations may put pressure on suppliers to expand into proximity and Emerging Markets.

However, if the deal between Broadcom and Qualcomm is completed, the scale of M & A transactions in 2017 will far exceed the Association's forecast.

"Although capital markets are greedy and cruel, the power of the market is the most efficient institutional arrangement.If you do not do well, you may be acquired, and a whip is always prepared behind the management," Wang told reporters.

Giant integration still faces another risk element: antitrust regulation.

Qualcomm said in its response "also take into account the follow-up regulatory uncertainty." Obviously, this refers to the risk of antitrust review brought by the combination of over one hundred billion U.S. dollars. Needless to mention, in the past three years, Qualcomm itself has already been polled by competition law enforcement agencies in major jurisdictions in the world, including China, the United States, and Europe, due to its business operations or business models. It has successively received reports from China, Japan, South Korea and other important market price tag.

No matter what kind of standard, more than 100 billion US dollars of high-price mergers and acquisitions, will enter the field of antitrust regulation, and get the focus.

China's Ministry of Commerce spokesman peak peak November 9 at a regular conference answering reporters asked, said the Ministry of Commerce has taken note of the relevant reports, from the current information, the transaction is still in the consultation stage. According to the relevant provisions of China's "Anti-Monopoly Law," once the transaction is concluded, if the statutory conditions are met, it shall report to the Ministry of Commerce a centralized examination by the operator.

The European Commission (hereinafter referred to as "the Commission") responsible for competition commissioner Margaret Westag through the press officer told the first financial reporter the first time responded that currently can not comment, have not received the transaction declaration. "If you need to pass the Competition Commission report, this is the enterprise's own task." she said.

Maurits, the lawyer for Qualcomm's case, told CBN reporter that he was not allowed to comment at this stage.

In China, the Ministry of Commerce is mainly responsible for antitrust review of concentration classes of operators. The standard is based on the "State Council Regulation on Centralized Declaration of Operators" ("Regulations") promulgated in 2008. In accordance with the "provisions", "all-in" merger should be prior to the State Council department in charge of business reporting, not to declare the implementation of concentration.

The EU situation is similar, according to the European Commission to the first financial correspondent sent the relevant materials, the EU merger control provisions: the two companies worldwide turnover of more than 5 billion euros; each company in the European region turnover reached 250 million Euro, the transaction must be notified to the European Commission.

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