Broadcom Ltd. shifted strategy in its proxy fight for Qualcomm Inc., saying it would ask Qualcomm shareholders to elect six, rather than 11, directors nominated by Broadcom.
Broadcom (Nasdaq: AVGO) made the announcement on Feb. 13.
The new approach would replace the board majority while providing continuity on the board, Broadcom said.
Separately, there are reports that Qualcomm and Broadcom agreed to meet on Feb. 14, though it is unclear where the meeting will be. Qualcomm (Nasdaq: QCOM) has said it is open to talks if the end result maximizes shareholder value.
Broadcom’s six board nominees are Samih Elhage, David Golden, Veronica Hagen, Julie Hill, John Kispert and Harry You. Meanwhile, all 11 Qualcomm board members are running for reelection.
“By electing all of the Broadcom nominees, Qualcomm stockholders will direct a simple majority of the board to transact with Broadcom on its highly compelling proposal, while also ensuring that there is board continuity with the remaining five directors,” Broadcom said in a statement.
Broadcom is offering to buy Qualcomm for $121 billion, trading each Qualcomm share for $60 in cash and $22 in Broadcom stock.
Broadcom’s potential acquisition of Qualcomm would need to stand up to regulatory scrutiny from governments around the world. To avoid antitrust objections, a Broadcom attorney said the company plans to sell Qualcomm’s Wi-Fi networking processor business, as well as its radio-frequency front end electronics business. The latter is a joint venture with TDK.
Attorney Daniel Watkins of Latham & Watkins LLP made the statements in a wide-ranging document about the deal’s legal ramifications. Broadcom filed the document with securities regulators Feb. 5.
Qualcomm Chairman Paul Jacobs’ response to Broadcom, filed with regulators Feb. 8, noted that there is a risk of irreparable harm to Qualcomm if the transaction falls apart midway through the process.
“Is Broadcom willing to commit to take whatever actions are necessary to ensure the proposed transaction closes?” Jacobs’ response said.
“This is extremely important to value preservation for our shareholders. The differences in our business models expose the company to significant customer and licensee risk between signing and closing an agreement. It is indisputable that there are significant regulatory hurdles in your proposed transaction. It is also indisputable that if Qualcomm entered into a merger agreement and, after an extended regulatory review period the transaction did not close, Qualcomm would be enormously and irreparably damaged. If you are not willing to agree to do whatever is necessary to ensure a transaction closes, we will need you to be extremely clear and specific about exactly what actions you would refuse to take, so that we can properly evaluate the risk to Qualcomm’s shareholders.”