Qualcomm has been seeking to walk a fine line between resisting Broadcom’s acquisition approach, which it says undervalues it and is fraught with regulatory risks, and demonstrating to shareholders and proxy advisory firms such as ISS that it is willing to engage to secure a better deal if possible.
ISS recommended to Qualcomm shareholders that they vote for four out of the six board director nominees that Broadcom has put forward for election at Qualcomm’s shareholder meeting on March 6.
This would prevent Broadcom’s winning a majority on Qualcomm’s 11-member board, but ISS said such a vote by Qualcomm shareholders would offer a reasonable path to a negotiated deal that would deliver value.
“The tenor of (Qualcomm‘s) engagement leading up to the present raises questions as to whether the incumbent (Qualcomm) board is committed to playing its part in attempting to maximize the offer”, ISS said in its report.
ISS said it did not recommend voting for all six Broadcom nominees because Qualcomm’s board would then be less inclined to drive a hard bargain with Broadcom in deal negotiations. ISS recommended that Broadcom nominees Samih Elhage, Julie Hill, John Kispert and Harry You should be elected as Qualcomm board directors.
Qualcomm is continuing to reject the proposed deal. No new meeting between the two companies has been scheduled.
ISS said in its report that Broadcom’s latest $82 per share cash-and-stock bid, which Broadcom CEO Hock Tan has called its best and final offer, does not appear to be clearly superior to Qualcomm’s potential standalone value in the short term. ISS added, however, that the offer seemed to represent a reasonable starting point for negotiations.
Even though both companies “have adopted strategies that do not lend themselves to fluid negotiations”, a deal between them is possible, ISS said. It suggested that Qualcomm shareholders could gain greater exposure to the deal’s potential upside if they were to receive more of the combined company.
ISS also said it appeared more likely than not that Broadcom and Qualcomm, with their collective experience and resources, can find a reasonable path to regulatory approval, despite Qualcomm’s current concerns about antitrust risk.