Mobile chipmaker Qualcomm Inc on Monday rejected rival Broadcom Ltd's $103 billion takeover bid, saying the offer "dramatically" undervalued the U.S. company.
"After a comprehensive review, conducted in consultation with our financial and legal advisors, the Board has concluded that Broadcom's proposal dramatically undervalues Qualcomm and comes with significant regulatory uncertainty," Qualcomm's Presiding Director Tom Horton said in a statement.
Broadcom made its unsolicited bid last week in its efforts to become the dominant supplier of chips used in the 1.5 billion or so smartphones expected to be sold around the world this year.
Reuters reported on Sunday that Qualcomm would rebuff the $70 per share offer, citing people familiar with the matter.
Qualcomm Chief Executive Steven Mollenkopf has spent the past few days soliciting feedback from Qualcomm shareholders, and he feels that Broadcom's $70-per-share bid undervalues the company and does not price in the uncertainty associated with getting the deal approved by regulators, according to the sources.
Broadcom CEO Hock Tan, who said earlier this month that he would redomicile his company to the U.S. from Singapore, has stated he is open to launching a takeover battle. The sources said Broadcom was preparing to submit a slate of directors by Qualcomm's nomination deadline on December 8. That would allow Qualcomm shareholders to vote to replace the company's board and force it to engage with Broadcom.
Broadcom has also been deliberating the possibility of raising its bid for Qualcomm, including through more debt financing, some of the sources said, although it was not clear when.
The sources asked not to be identified because the deliberations are confidential. Qualcomm and Broadcom did not immediately respond to requests for comment.
Qualcomm provides chips to carrier networks to deliver broadband and mobile data.
It is engaged in a patent infringement dispute with Apple Inc, and it is also trying to close its $38 billion acquisition of automotive chipmaker NXP Semiconductors NV after signing a deal in October 2016. Broadcom has indicated it is willing to acquire Qualcomm irrespective of whether it closes the NXP deal.
NXP shares have been trading above Qualcomm's offer price, as many NXP shareholders, including hedge fund Elliott Management Corp, have been holding out for a better price.
