Shares of Qualcomm (QCOM 65.54, +2.22, +3.5%) are on the move today and it has itself to thank for that. In an SEC filing this morning, Qualcomm let it be known that it sent a letter to Broadcom CEO, Hock Tan, clarifying that it is still open to being acquired by Broadcom (AVGO 253.36, -0.35, -0.1%) if the latter company raises its offer price.
This clarification from Qualcomm is a big deal, because it follows a second meeting between the two companies held on February 23 and it concedes that price is now the major roadblock to getting a deal done, assuming Broadcom is amenable to mark-ups Qualcomm made to Broadcom's previously released draft merger agreement.
One important mark-up is a proposed increase in a reverse termination fee from 8% to 9% if the transaction is terminated other than due to a breach of the agreement by Qualcomm or Qualcomm fails to obtain stockholder approval.
Another mark-up entails Broadcom agreeing to any conduct remedies and other remedies that could be imposed by regulators that would not have a material adverse effect on the combined company after the divestitures.
Separately, Qualcomm is also seeking disclosure of Broadcom's plans for how Qualcomm's licensing business would be structured and operated after the deal closing.
The aim is to seek an appropriate level of protection for Qualcomm shareholders in what is certain to be a closely scrutinized merger proposal by regulators seeing that it would marry two industry behemoths and would represent the largest technology transaction in history.
If Broadcom is agreeable to the terms laid out by Qualcomm, Qualcomm said it would drop its "hell or high water" commitment on the regulatory front.
Qualcomm proposed four next steps for Broadcom's consideration: (1) finalize non-price terms (2) execute a non-disclosure agreement and begin bilateral due diligence (3) agree on an approach to provide information on the licensing business and (4) arrange a meeting focused on price.
The pricing issue is the biggest of them all. Broadcom recently lowered its "best and final" offer to $79.00 per share in cash and stock ($57 in cash and $22 in Broadcom stock) from $82.00 after Qualcomm raised its offer to acquire NXP Semiconductors from $110.00 per share in cash to $127.50 per share in cash.
Notably, Qualcomm's stock price has not moved much since Broadcom made its acquisition offer, mostly because shareholders didn't see a deal getting done due to regulatory issues and price.
The companies appear to be making some strides as it relates to addressing their approach for dealing with regulatory pushback; and Qualcomm has softened its own resistance to being acquired, assuming Broadcom returns to the table with a "materially higher" acquisition price.
The acquisition ball is now back in Broadcom's court. The bounce in Qualcomm's stock price today, however, implies some optimism that Broadcom will be willing to play the game on better terms now that Qualcomm has opened itself up more to the possibility of being acquired.