A strong refusal, another threatened not to give up, Broadcom and Qualcomm, the acquisition of new players in the semiconductor industry may have just opened the drama.
On Monday, Qualcomm rejected Broadcom's $ 130 billion takeover offer on the grounds that it "underestimated the value." In a response to First Financial, Qualcomm underlined that chief executive Steve Steve The tactics implemented by Steve Mollenkopf and his team create value for Qualcomm shareholders well above the offer.
Broadcom's current CEO, Hock Tan, immediately said he would not give up the acquisition. 'We still think the proposed offer is the most attractive to Qualcomm shareholders, and we are encouraged by their reaction, many of them 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 CBI reporter that it is still hard to tell if Qualcomm's response was to face the crisis in its foreign stance or to shareholders 'true beliefs.' After all, capital is as unpredictable as humanity '
However, Qualcomm also mentioned in the response that "taking into account the uncertainty of follow-up regulation." Clearly, the merger with a total value of more than one hundred billion U.S. dollars is bound to be the focus of antitrust authorities.
Broadcom '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.
In terms of volume and technical strength, the two are comparable.Comments at Gartner, an IT research and analysis firm, ranked No.5 in the semiconductor industry and third in Qualcomm in the semiconductor industry in 2016. In addition, both companies are the global leaders Mobile Internet processors and communications companies at the bottom of the patent overlord, but 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 member of the semiconductor industry but knows how to play the report. "After Chen Fuyang bought Broadcom Direct price increase of 25%, if the customer does not agree directly out of stock.Huawei, such a large customer, also be required to place the demand for the coming year ahead of schedule in order to ensure the availability of the old price.
Bertone's response also reveals a high level of confidence in its lines, and Broadcom said that Moelis & Company LLC, Citibank, Deutsche Bank, JP Morgan, Merrill Lynch and Morgan Stanley are all Broadcom financial advisors and are represented by Wachtell, Lipton , Rosen & Katz (a world-class law firm) and Latham & Watkins LLP (Raytheon International).
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 the Qualcomm board, which represents the interests of management, rejected the offer in line with expectations, but Qualcomm's shareholding structure is very fragmented, with almost all of the top funds in the rankings. Decline in the case, Broadcom is spotted the fund managers have a good attitude to close, only 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% .From FY17, Qualcomm's total revenue was 22.291 billion US dollars, down 5%; net profit of 2.465 billion US dollars, representing a decrease of 57% over the same period the previous 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, led the way in the market. However, this model is being challenged by major corporations and governments everywhere. Qualcomm is According to the overall price of mobile phone charges, even if the phone's Qualcomm chip only a small part of the overall cost. 'Global intellectual property information service providers Bud 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 Editor combed that it was a watershed for Qualcomm in 2014. Qualcomm reported revenue of $ 26.5 billion and net profit of $ 7.97 billion in fiscal 2014. Since then, Qualcomm's revenue has been declining, falling in FY17 To 22.391 billion U.S. dollars.For the net profit, it was 5.3 billion U.S. dollars in FY15, slightly up to 5.7 billion U.S. dollars in FY16 and then dropped to 2.465 billion U.S. dollars in FY17.
'In fact, the fundamental reason for accelerating the acquisition of the semiconductor industry is the decline in gross profit, high-tech star is 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 opportunities.'
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 told 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, said the next decade, the semiconductor is likely to integrate into the horizontal integration from upstream to downstream vertical integration.
In fact, with the performance decline, the semiconductor industry has been staged during the two years of rapid mergers and acquisitions.
Semiconductor Industry Association (SEMI) recently released report shows that in 2015, semiconductor companies mergers and acquisitions more than 60 billion US dollars, 2016 and 2017 may be 116 billion and 93 billion respectively, the association said that in 2016 it seems Is the peak of the mergers and acquisitions frenzy, these mergers and acquisitions mainly in mature markets to increase the scale and competitiveness.
More than 60 mergers and acquisitions were announced in 2016 and 49 ended the merger in the year, with three of them accounting for more than 75% of the annual M & A deals, including Avago's $ 37b acquisition of Broadcom (currently Broadcom Followed by Avago acquisitions); Softbank acquired ARM Holdings, a $ 32 billion semiconductor supplier of intellectual property; and Western Digital acquired Sandisk for $ 19 billion.
SEMI said that it expects to complete 12 transactions in the global semiconductor industry worth more than 93 billion U.S. dollars in 2017. The largest M & A deal for 2017 acquisition is expected to be a $ 47 billion deal between Qualcomm and NXP Semiconductors, The largest M & A deal in history; the second highest-value deal was a $ 14.8 billion deal between AnalogDevice Inc. and Linear Technology Group. These two transactions accounted for only a fraction of the total global transactions in 2017 66% of the amount.
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 equipment manufacturers, foundries and fabless integration between the manufacturers, further price pressure and more Tough negotiations could put pressure on suppliers to expand into neighboring and emerging markets that offer the potential for sustainable growth.
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 cruel and greedy, 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 management,' Wang declared to reporters.
Giant integration still faces another risk element: antitrust regulation.
Qualcomm said in its response that "regulatory uncertainty is also taken into account." Obviously, this refers to the antitrust risk posed by this combination of over a hundred billion dollars, not to mention that in the past three years, Qualcomm As a result of business operations or business models, competition law enforcement agencies in the major jurisdictions in the world, including China, the United States, and Europe, have themselves conducted rounds of investigations and have received a series of sky and snow tickets from major markets such as China, Japan and South Korea.
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.
Speaking at a regular press briefing on November 9, the spokesman for China's Ministry of Commerce spokesman said that the Ministry of Commerce has taken note of the relevant reports and from the current data, the transaction is still in the process of negotiation. According to the " Monopoly law, "the relevant provisions of the transaction once reached, if the statutory conditions to meet, should report to the Ministry of Commerce focused review.
Margaret Westtag, the commissioner for competition affairs of the European Commission ("the European Commission"), responded to CBN reporter through his press officer for the first time and said that there is no comment at this moment and has not yet received it The declaration of this transaction. 'Whether it needs to be notified to the Competition Commission is the business's own responsibility,' 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 centralized operators, which is based on the "State Council Regulation on Concentration Declaration of Operators" (hereinafter referred to as the "Regulations") promulgated in 2008. According to the "Regulations" The merger shall be declared in advance to the competent commercial department of the State Council and shall not be concentrated if not declared.
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.