Guo Liqin
'Countless tech stories that have led the wave tell you that no single company is able to confront the cycle forever and stand tall in the forefront. When the technology starts to descend, the capital hunters hovering on the side will taste'
Broadcom currently has a market capitalization of about $ 130 billion, with debt accounting for 68% of the shares, a high share of the current $ 105 billion and the $ 30 billion of Qualcomm debt.
Local time on November 6, Brian, a veteran investment banker in New York, picked up the first cup of coffee on Monday morning and harvested the heaviest news of this year: the top 10 global semiconductor companies, Broadcom, With a total cost of about $ 130 billion, the top three Qualcomm companies (suspected to be malicious) have been acquired and, if successful, the deal the industry calls "all-in-one" will become the largest TMT merger in history.
The news came as Qualcomm (QCOM) shares soared, he quickly cleared out his stock of Qualcomm stock.
At the same time, Qualcomm CEO Steve Morinkov is on his way to Asia as part of a senior business delegation to U.S. President Trump's visit to China.
He must not know the acquisition, or at the moment should be in the United States.Thus, it is estimated that TMT bankers, Thanksgiving and Christmas have not had. 'After a day's work, Bryant said to the first financial reporter .
And after the process completely in his expectation, a week after the 13th, Qualcomm to 'greatly underestimate the value' grounds, the board unanimously rejected the offer, while Broadcom is still insisting on the acquisition.
On December 4, Broadcom nominated 11 director candidates to replace existing members at the Qualcomm Annual General Meeting in 2018. Qualcomm quickly responded that it had received the list, but Broadcom's move was an open attempt to seize control of Qualcomm's board of directors Right to advance its takeover bid, while Broadcom and Silver Lake act to require shareholders to make a decision now on this non-binding deal proposal.
Qualified or not, Qualcomm, the world's largest maker of mobile chips that once led the wave of technology in the 3G and 4G era, will be passively involved in an ultimate whirlwind at a sensitive point in global technology upgrades: a $ 38 billion bid a year ago NXP Semiconductors, the world's largest supplier of automotive chips, has not yet completed its antitrust review process and is now traded for several years in the wake of multinational antitrust investigations and the largest client lawsuit Downturn, which is targeted by the industry capital hunter Broadcom.
In the past three years, due to the sluggish overall sales and investment cycle of the semiconductor industry, several experienced M & A witnesses told CBN reporter that numerous scientific and technological stories that have led the wave tell you that no enterprise can stand up to the cycle forever and stand firm When the technology starts to descend, the capital hunters hovering on the side will follow the taste. 5G is expected to start full-scale commercial operation as early as 2020 and whether it can go all out to survive this sensitive period before this and become Qualcomm's current the biggest challenge.
'All-in-one' combined to set off waves
A stone aroused Melaleuca waves, when Broadcom issued a high price offer, a widespread war horn has sounded.
No matter what the outcome, Bryant, the largest TMT in the history of the 'snake swallow like' acquisitions will surely involve the top half of investment banks and law firms around the US stocks.
Simultaneously began to pay attention to this huge mergers and acquisitions there are antitrust agencies around the world.China's Ministry of Commerce spokesman peak peak November 9 at a regular conference answering reporters asked that the Ministry of Commerce has taken note of the relevant reports from the current information According to China's "Anti-Monopoly Law," the relevant provisions of the transaction once reached, if the statutory conditions to meet, should be declared to the Ministry of Commerce operators focus review.
On November 14, Margrethe Vestager, a well-known EU competition commissioner, also arrived in Beijing to follow the established practice of communicating with China's antitrust counterparts on the detailed enforcement of some specific cases.
'We are still examining the case of Qualcomm's acquisition of NXP a year ago, and it may not be until 2018.' Vestag told First Financial after the meeting on November 15.
Clifford Chance Brussels partner Thomas commented to CBN reporter that he expects the Commission to pay close attention to the new case, given the Commission's current in-depth investigation of Qualcomm's acquisition of NXP. Will inevitably have an impact on the existing survey.
On September 11, Koren Wong-Ervin, a former legal adviser to the U.S. Federal Trade Commission Office of International Affairs, left George Mason University and joined Qualcomm as the head of its internal advisory team in the Intellectual Property and Competition Policy Department.
From late November to early December, she appeared at several roundtable seminars in several Chinese universities. "It is indeed a real stress that the participating companies are being investigated worldwide," said Karen Wang, at a seminar on November 27 Told CBN reporter, 'I will try my best to do my job, at least not on my shoulders.'
Interestingly, just two weeks after Broadcom offered its offer, the U.S. Department of Justice (DOJ) blocked a similarly large merger, filed by the U.S. Department of Justice antitrust division in the District of Columbia to deter AT & T Time Warner $ 85.4 billion takeover deal.
Price game will run through
The widely anticipated acquisition and bidding game is undercurrents and is expected to go through several rounds of bidding based on the laws of the U.S. capital markets in the past.
'I am waiting for Broadcom's next round of bidding,' Bryant told First Financial News. 'Price is the most central factor in such a merger.'
In his view, Broadcom currently stands at about $ 130bn in market capitalization, with debt accounting for 68% of the shares, a high percentage, given the current price of $ 105bn and the succession of Qualcomm's $ 30bn debt, considering To the acquisition of the financial leverage, the completion of the transaction after the overall debt-to-asset ratio will be very high, financial pressure .But the current Broadcom bids will make all three embarrassing.For Broadcom, the current bid has almost been Stretched its own funding chain to the extreme '$ 70 bid is $ 60 in cash plus $ 10 stock, it is easy to imagine that 60 US dollars in cash is Broadcom can borrow from the bank the maximum amount of cash, there is really no more money And make up $ 10 stock price.
But the price is apparently too low for Qualcomm shareholders, with Qualcomm breaking the $ 80 a share in the global 4G rush of 2014. Qualcomm later renegotiated royalties, increased competition and multi-national antitrust Review and a series of negative news, the stock price continued to decline.In 2017, due to the continuous fermentation with Apple's patent dispute, Qualcomm's share price plunged from $ 68 at the beginning of the year to once fell below $ 50 / share while standing Broadcom shareholders And to provide leveraged financing from the bank's point of view, take so much money to buy a subject full of uncertainty, the risk is considerable.As Qualcomm 40% ~ 50% of revenue from Apple, if Apple takes the risk of replacing Qualcomm, (Not impossible, because Intel is also doing a similar chip), Qualcomm's share price will likely be cut, financing repayments will be a problem.
"I would like Qualcomm's board to accept that if Broadcom were willing to pay $ 80 / share, Qualcomm's CEO could come under the charge of the merged new company, if only with greater sincerity." But where does Broadcom find the money? ? "Brian said.
Although Broadcom's announcement mentions several well-known banks, Bryant noticed that these banks only issued a letter of high confidence and they were only interested in borrowing, not loan commitment letters. "This shows that banks are also playing drums." He said .
Such a huge merger will not only inevitably come under close guard against antitrust but also make the review process extremely difficult due to the superposition of malicious acquisitions.
Thomas told First Financial said the antitrust review of Broadcom and Qualcomm mergers is likely to plunge into protracted war and he expects the transaction is likely to face multiple antitrust-intensive antitrust examinations in the French jurisdiction, including the EU, in particular Because of this merger will lead to the concentration of components in some semiconductor space, the EU may pay special attention to the mixed M & A effect.
Thomas explained that in a bona fide acquisition, both parties will work in the same direction to approve the transaction, but in a hostile transaction, the acquired target has a strong incentive to take the antitrust as an obstacle to the merger and acquisition and the target to be acquired will provide a lot of Information, used to defend that the trade would lead to anti-competitive effects.
'I went through this process in a merger between Oracle and Peoplesoft when I represented Oracle and the acquisition did not want to be taken over as antitrust as a major card to prevent the deal from passing through. "Thomas recalled that they" The antitrust scrutiny process with the United States was very difficult and in the end the deal was approved without any conditions, but it went through a lengthy and painful process.
Why is the capital hunter eyeing
In fact, both parties have experienced several major acquisitions in the field of TMT refresh history before Broadcom formally launched its offer to Qualcomm.
Mark Ian, a semiconductor strategist at NXP in Europe who had left Qualcomm one year ago on Broadcom's multiple acquisitions and acquisitions, Feel deep.
'The law of science and technology is the case, in the down industry, when your technology is no longer maintained an absolute advantage, it may be targeted by capital hunters, financial integration has become the object.' Alice on the first financial reporter Described Road.
Over the past 20 years, the global semiconductor industry has experienced many ups and downs in its cycles with the ups and downs of downstream mobile phones and Internet technologies, as well as the impact of the overall economic cycle.
Retroactively, in March 2015, NXP agreed to acquire Freescale, another semiconductor company, for $ 11.8 billion, eventually making the combined NXP world's largest automotive electronics semiconductor company the largest share of smart cards; and In October 2016, Qualcomm expects to acquire NXP for a total cost of 38 billion U.S. dollars. The acquisition also resulted in the largest acquisition of the semiconductor market in the world at the time.
At the same time, Broadcom also experienced several acquisitions and acquisitions.The most well-known in the industry is that in May 2015, AvagoTech (AvagoTech) and Broadcom jointly announced that they have reached a definitive agreement , Avago acquired Broadcom, the world's largest maker of Wi-Fi chips, for a total of about $ 37 billion in cash and stock, and the combined company will be renamed Broadcom Ltd., a large-scale acquisition that set a new record. .
Slightly different is that Qualcomm acquired NXP this nearly 40 billion US dollars acquisition, Qualcomm all paid in cash to complete the acquisition Broadcom is an obvious leveraged buyout. Avago paid 17 billion US dollars in cash and 200 Billion shares.Barton shareholders hold a combined 32% stake in the company.At that time, Avago use its own funds and bank financing 9 billion US dollars to pay the cash portion.
Elizabeth's career spanned several ups and downs over the past decade and she worked in Broadcom's chip divisions recalling Broadcom's current acquisitions in the market and the eventual " M & A experience, fresh memories.
Elizabeth as Broadcom side, then 'snake swallow elephant' feel no sense.In the May 2015 acquisition was eve, although Broadcom's market value of 28 billion US dollars, less than Anwar high (about 34 billion US dollars), but Broadcom Operational level is very healthy in 2014, Broadcom revenue of about 8.4 billion US dollars, ranking ninth in the world, the first quarter of 2015 the world's eighth share, are above Anwar.
In Elise's view, the acquisition of companies access to products, technology and talent is the industry's norm, the old Broadcom has been expanded by the scale of acquisitions, as a leader is to do technical background, the idea of mergers or acquisition before the product is still good. ' Do not necessarily able to make, buy a business model product form, financial status is known.
But such business mergers and acquisitions continued until the encounter with deep capital M & A Arvato Anwar founding in 1961, was originally HP's electronics division in 2000, Avago became separated from Hewlett-Packard Agilent Technologies subsidiary. In 2005, private equity funds led by the Silver Lake Fund and KKR acquired Avago for $ 2.660 billion and arranged the company to list on NASDAQ in 2009. As the cost of production and design increases, the chip industry is under way Integration, Avago has been leading the trend, made several acquisitions, including the end of 2013 to 5.6 billion acquisition of LSI Corporation, 2014 made three acquisitions.
'The acquisition was quiet, and when it was announced, it was announced that no one knew before it was acquired.' Recalling the past, Elise said there are only three independent operating divisions in Laotong Global, but after the official announcement, The tone of the announcement made by the three responsible officers to their subordinates also found themselves suddenly.
And after the announcement, she thought, several of Broadcom's founders wanted to cash in themselves, so they sold it. 'Because only one founders went to the new Broadcom, the rest announced their retirement.'
Elizabeth left Broadcom on the eve of the merger. Looking at the post-merger situation, she found that the whole idea of operation was to reduce costs and to chase short-term profit and loss-making departments, basic research departments and functional departments. She seems that such an integration is doomed to having pains for those who are in it.
From another point of view, Alice believes that capital participation is not a bad thing, and I've heard that the day after the consolidation of the new company has finally gotten better because the share price has gone up by a factor of three and the bonus tripled three times a year She said, 'I honestly think it's not bad, maybe I'm accustomed to staying in a relatively fast paced company, so I do not think there's any problem with the old being pushed, and I may pay more attention to me Team and boss. '
Mark also described the first financial journalist similar mentality, and his capital hunter is the former CEO of NXP.
In the view of the person who has left NXP, NXP was originally a Nasdaq-listed U.S. company although it is based in the Netherlands. Since January 2009 when American Richard L. Clemmer joined as CEO, the company's climate More and more emphasis on the push (push), who called 'Rick' CEO was born in the old leveraged buyout king, the world's oldest and most experienced private equity firms KKR Group.
'Rick worked so hard for so long to work as a better price, if traded, his bonus and stock, will reach almost $ 428 million.' Aforementioned say, 'but embarrassing is now Qualcomm and NXP actually Not yet completed.
The future of integration
The two habits all rely on 'buy and buy' to scale up, while debt-ridden and market-capped Macs could lead to the world's third-largest semiconductor company after Intel and Samsung, if the price hits.
But whether Bryant buys Qualcomm stockists or those in the industry who have long-term and Qualcomm affiliations, Qualcomm CEOs feel strong and idealistic and will not easily compromise, making the acquisition The process leads to expectations.
But the real issues that Bryant and his investment bank colleagues are concerned with include not only where Broadcom is able to finance enough cash; how and why Qualcomm ends its case with Apple, a customer who accounts for nearly half of the revenue; the most important Is, compared to NVIDIA stepped in the industry tone, and almost no rival US stocks company, Qualcomm's technological superiority and where?
Qualcomm, which led the tide in 3G and 4G era, is in need of a sensitive period of transition from 4G to 5G business.Based on the public information, the first global 5G standard will be established in early 2018, and major countries in the world are actively promoting 5G deployment , The United States, South Korea, Japan and other countries have put 5G business on the agenda in 2020. China is currently conducting the second phase of 5G test, 2018 will be large-scale experimental networking, 2019 5G network construction, and strive to 2020 Achieve commercial.
Karen Wang Erwen first financial reporter said that although the 5G standard has not been set, but in addition to mobile phones, cars, smart refrigerators, etc., are the future can be authorized mobile electronic terminal.
But in the current 4G era, the number of smartphones in the lower reaches of Qualcomm has reached a bottleneck in the number of growth and its technical control has begun to face challenges. A downstream insider told First Financial said that in the past, Qualcomm ' Mode dare to speak downstream big clients, also began to openly resist by the lawsuit with Apple and the suspension of payment of royalties worldwide, Qualcomm shares have dropped 15% this year, the market value of 82 billion US dollars.On the contrary, by Semiconductor industry pick up the impact of Broadcom shares this year, the cumulative increase of 51%, the market value of 109 billion US dollars.
Another real problem is that before the scale of 5G business, Qualcomm's technological advantages can not be realized, it will not be able to improve the voice of its licensing authority.On the invitation to Broadcom not long before, there is news broke, the current global first, Samsung and Huawei, the third-largest handset makers, have also suspended the payment of royalties to Qualcomm after Apple, asking for a renegotiation of the rates, although Qualcomm executives for the first time denied this rumor to First Financial News Corp. Inaccurate ', however, many industry insiders told First Financial said the rate of decline is a general trend, but how to reduce the technical, to profit, to consider the interests of major clients, to consider the legal and policy risks, but also consider It is a good time for all our customers to be relatively fair.
Is the fall before dawn, or survived, no matter what the outcome of this acquisition, are worth watching.