After Broadcom announced last week it would seek to buy its competitor for $103 billion (€88.3 billion), Qualcomm said Monday that the offer was significantly undervalued and that a tie-up between the two chipmakers would face substantial regulatory resistance.

Following a unanimous vote of Qualcomm's board against the proposed takeover, the San Diego-based company said it was in a unique position to grow on its own.

"We are highly confident that the strategy of Steve [Mollenkopf, chief executive] and his team are executing on provides far superior value to Qualcomm shareholders than the proposed offer," said Qualcomm board director Tom Horton.

Qualcomm, which makes the Snapdragon chips found in smartphones and tablets, is the world's third largest chip supplier after Intel and Samsung, according to research firm Gartner. But its share price has been battered in recent months by a widening legal fight with Apple, one of its largest customers.

Analysts have said a deal between the two would help Qualcomm settle its legal battle with the iPhone maker as Broadcom has a closer relationship with Apple.

Hostile takeover looming

Broadcom made the bid in an effort 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.

The company said Monday it remained committed to pursuing a deal. Chief Executive Hock Tan argued its offer of $60 in cash and $10 in shares represents an "attractive" 33-percent premium to the company's average share price of the past month. As part of the deal, Broadcom would also assume about $25 billion in net debt.

"We continue to believe our proposal represents the most attractive, value-enhancing alternative available to Qualcomm stockholders and we are encouraged by their reaction," Tan said in a company release. He added that he had received "positive feedback from key customers" and was "encouraged" by shareholder reaction about the deal.

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Analysts said Broadcom can now raise its bid, go for a proxy fight or launch a hostile exchange offer. Loop Capital analyst Betsy Van Hees told the news agency Reuters that Qualcomm's "thanks, but no thanks response" wasn't surprising. "We would be surprised if at this point, Broadcom didn't move forward with a proxy fight," he added.

People familiar with Broadcom's plans said that the company was preparing to force a deal if Qualcomm continues to resist a takeover. Broadcom could seek to put its own appointees on the board of Qualcomm by winning over existing shareholders in a proxy battle ahead of Qualcomm's annual shareholder meeting in March next year.

If Broadcom makes a hostile bid, Qualcomm's governance rules would allow the rival to submit its own slate for the entire 11-member board by the December 8 nomination deadline. The easiest option, however, would be to talk to Qualcomm's board and agree on a higher price.

According to Susquehanna analyst, the right price for Qualcomm could be between $80 and $85 per share, and Broadcom could go up to $90. But any deal would face scrutiny from the antitrust regulators as the combined company would own the high-end WiFi business globally.

uhe/jd (Reuters, AP, AFP)