LONDON, UK / ACCESSWIRE / January 25, 2018 / Active-Investors.com has just released a free research report on QUALCOMM Inc. (NASDAQ: QCOM). If you want access to this report all you need to do is sign up now by clicking the following link www.active-investors.com/registration-sg/?symbol=QCOM as the Company's latest news hit the wire. The Company reached out to its shareholders on January 23, 2018, to garner their support for the re-election of the Company's Board at the Annual Meeting of Shareholders (AMS) scheduled on March 06, 2018. The communication from the Company's Board listed out key points of concern with detailed explanation as to why Broadcom Limited's (NASDAQ: AVGO) hostile takeover bid "dramatically undervalues" the Company and is not in the best interests of Qualcomm's shareholders. Register today and get access to over 1,000 Free Research Reports by joining our site below:
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The Company's communication is in response to Broadcom's letter to Qualcomm's shareholders on January 05, 2018 followed by a statement on January 16, 2018, which urges them to elect Broadcom's 11 nominees to Qualcomm's Board at its AMS. Broadcom had made an unsolicited proposal to acquire Qualcomm in November 2017. The proposed deal was valued approximately at $130 billion.
Points to ponder
Qualcomm has appealed its shareholders to consider the following points of concerns with Broadcom's unsolicited bid.
- Qualcomm believes that Broadcom will be unable to deliver value to Qualcomm's shareholders even if Broadcom makes a superior proposal given the complex regulatory challenges which could take 18 months or more to be completed.
- Qualcomm questioned Broadcom's ability to deliver immediate cash to Qualcomm's stockholders via its proposal.
- Qualcomm was especially critical of Broadcom's proxy fight aimed at replacing Qualcomm's Board with nominees backed by Broadcom and its private equity partner, Silver Lake Partners. Qualcomm's contention is that Broadcom's nominees lack Board experience in a large-cap technology Company and hence if elected cannot provide guidance to a large, global and complex tech Company like Qualcomm.
- Qualcomm also asked its shareholders to consider how Broadcom is dragging its feet in kickstarting the process to get regulatory approvals in most countries around the world even after two months of making the takeover bid. The matter is worrying, given that a large transaction like the Qualcomm-Broadcom would gain the attention of most antitrust regulators and national security groups across nations.
Qualcomm communication states that since the Broadcom's proposal raises significant regulatory and national security risks and is expected to be opposed by public and private customers, it would not be prudent for Qualcomm's shareholders to elect Broadcom's nominees and put the Company at risk of significant value loss if the deal is not approved.
Qualcomm's letter explains how the deal would require approval from regulators across US, Europe, China, South Korea, and Japan as well as clearance from national security regulators in the US and other countries. The Company explains how these regulators would be scrutinizing the deal given the global nature of the mobile communications industry and the impact of such deal on local trade, domestic industrial policy, and national security issues.
Qualcomm's concern is that these antitrust regulators could propose to sell overlapping product lines, stipulate conditions for doing business in the said country/market and other potentially contradictory remedies. Even if the merged entity were to divest product lines and modify business operations, there is no guarantee that this will be acceptable to regulators.
Qualcomm also refuted other claims made by Broadcom in various communications to Qualcomm's shareholders, which include the following:
- Qualcomm questioned Broadcom's claims that Qualcomm's customers favor the deal. Qualcomm has pointed out that none of its customers have publicly supported the deal and reports by CNBC and the Wall Street Journal claimed that the Company's US and Chinese customers are against the deal. The opinion of customers is sure to influence regulators.
- Qualcomm questioned Broadcom's claims of being able to complete the transaction within 12 months of signing the final agreement. The Company has pointed out that Broadcom needed more than 12 months to complete the acquisition of the smaller and less complex company Brocade Communications Systems, Inc. (NASDAQ: BRCD). Qualcomm's fears are not unsubstantiated as the US Federal Trade Commission (FTC) has made a second request for an extensive review Broadcom's bid for Qualcomm on January 20, 2018. Qualcomm has pointed out that 75% of the deals getting into a second review from regulators are either blocked or are subject to divestitures and/or other conditions. FTC is investigating Broadcom separately for anticompetitive tactics in negotiations with customers which came to light after media reports. This adds to the complexity of the matter.
- Broadcom has claimed that it can easily get national security clearance from the Committee on Foreign Investment in the United States (CFIUS). Qualcomm has pointed out that since Broadcom is domiciled in Singapore and is attempting a hostile takeover of a US-based Company it raises national security concerns. Broadcom has already started the process of re-domiciliation Broadcom's parent Company from Singapore to US, for which it has made the requisite filings with the Securities and Exchange Commission (SEC) on January 22, 2018. Qualcomm's take is that even if Broadcom re-domiciles to the US, the national security concerns remain, and it has earlier faced resistance in getting security clearance when acquiring a US-based company.
- Qualcomm believes that shareholders are at the risk of losing substantial value of their holdings if the deal moves forward and is entangled in lengthy process for getting regulatory approvals. The Company runs the risk of losing customers and employees during this period which would weaken the Company. At the end of the entire process if the transaction is not completed, it would further erode the value of the Company.
Qualcomm reiterates that at the time of such lengthy and uncertain regulatory process, it would be prudent for Qualcomm's shareholders to rely on its existing Board and not choose Broadcom's nominees. Broadcom's nominees would not be qualified to lead the Company in such uncertain times and would only push Broadcom's agenda.
Stock Performance Snapshot
January 24, 2018 - At Wednesday's closing bell, QUALCOMM's stock marginally declined 0.53%, ending the trading session at $67.98.
Volume traded for the day: 12.37 million shares.
Stock performance in the last month – up 5.58%; previous three-month period – up 27.33%; past twelve-month period – up 23.60%; and year-to-date - up 6.19%
After yesterday's close, QUALCOMM's market cap was at $100.23 billion.
Price to Earnings (P/E) ratio was at 41.10.
The stock has a dividend yield of 3.35%.
The stock is part of the Technology sector, categorized under the Communication Equipment industry.
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