Report: Broadcom to release its candidates for Qualcomm's board tomorrow as deal turns hostile

Broadcom's $103 billion bid for fellow chipmaker Qualcomm is not only unsolicited, it is now hostile. With the latter turning down what would be the largest acquisition in the history of the tech sector, Broadcom plans on trying an end around to get the deal done. According to people close to the transaction, this involves starting a proxy fight for control of Qualcomm's board. These sources say that this will all start Monday when Broadcom announces its slate of candidates to run against Qualcomm's current board.

Qualcomm shareholders will get to vote between the company's present Board of Directors, and the names being proposed by Broadcom to replace them. If shareholders are voting their wallet, they will probably go along with the challengers. If Broadcom's group is voted in, it would have to continue overseeing Qualcomm until the deal could be closed. According to a report published tonight by Reuters, getting regulators to sign off on a Broadcom purchase of Qualcomm could take a year or longer.

Another anonymous source told Reuters today that Broadcom is not planning on announcing a higher bid for Qualcomm tomorrow. This source says that any higher bid would come in March following the results of the Board of Directors voting, which will take place on March 6th. If the results do not allow Broadcom to unseat Qualcomm's Board of Directors, we could see a new bid announced, high enough to get the majority of stockholders to tender their shares to Broadcom.

Institutions (like mutual funds, hedge funds and private trust funds) reportedly own 77% of Qualcomm's shares. If this is true, it is good news for Broadcom since these large stockholders are beholden only to their investors. In other words, they have a duty to sell their Qualcomm shares for the largest profit. If Broadcom decides to raise its bid before March, it could help the company win over Qualcomm's stockholders very quickly.

The current offer gives Qualcomm holders $60 in cash and $10 in Broadcom stock for each Qualcomm share. One money manager, Daniel Morgan, a vice president at Synovus Trust Co., says Broadcom would have to pay $85 to $95 for each Qualcomm share in order to get the deal done. Qualcomm closed Friday's trading at $65.49. Broadcom closed at $271.56.

source: Reuters