In a move that isn't any surprise to investors, Qualcomm (QCOM 62.17, -0.24, -0.4%) acknowledged after yesterday's close that its Board of Directors had unanimously rejected Broadcom's (AVGO 232.57, +3.00, +1.3%) unsolicited proposal to acquire Qualcomm for $82.00 per share, consisting of $60.00 per share in cash and $22.00 in Broadcom stock.
Broadcom made the aforementioned offer on February 5. It was not the company's first offer. That came in early November with a proposal to acquire Qualcomm for $70.00 per share, consisting of $60.00 per share in cash and $10.00 per share in Broadcom stock.
The $82.00 per share offer was said by Broadcom to be its "best and final" offer. The commonality between the two offers, though, is that neither moved Qualcomm's stock price.
To be fair, QCOM spiked ahead of the early-November offer as speculation mounted that Broadcom might be interested in acquiring the company. When the initial offer was made on November 6, QCOM was trading at $61.81. It closed that day at $62.52, or well below the offer price, underscoring investors' belief that the deal was unlikely to get done -- at least not at that price.
Price was not the only consideration. There were also antitrust concerns grounded in the assumption that regulators would not approve the proposed merger.
Shares of QCOM perked up a bit with general market conditions and amid speculation that Broadcom would eventually come back to Qualcomm with a higher offer. It did, as stated above.
When the $82.00 per share offer was communicated on February 5, shares of QCOM were trading at $66.07. It closed that session at $61.73 on a day that just so happened to produce a 4.1% decline for the S&P 500.
General market conditions helped preempt any positive response to the raised offer, but the underlying fact of the matter is that Qualcomm investors are finding it hard to believe this deal will be allowed to happen.
In Qualcomm's rejection letter, the Board stipulated that Broadcom's raised bid still materially undervalues Qualcomm and didn't do enough to address the regulatory commitment the Board would demand based on what it considers to be a significant downside risk of a failed transaction.
Qualcomm, however, is open to a meeting with Broadcom to discuss ways it can improve its offer and the certainty of its proposal.
Broadcom responded saying it would like to meet this weekend and that its proposed agreement includes an $8 billion regulatory reverse termination fee and a 6% per annum regulatory ticking fee on the cash portion of the merger consideration, net of dividends. For good measure, though, Broadcom reiterated that its $82.00 offer remains its best and final offer.
Shares of QCOM are actually down this morning despite a nice uplift in general market conditions, suggesting yet again that there isn't a strong belief on the side of QCOM holders that this deal will happen.