|Evaluating Broadcom's Qualcomm Acquisition Offer|
+ Qualcomm is indeed undervalued at the $70 per share offered in early November, and Broadcom’s second offer will likely be in the $80 - $90 range, presenting investors with a short term consolidation play.
+ Using a mix of median EV/EBITDA multiples and perpetuity growth of long-term US GDP growth to find the appropriate terminal values, both yielded prices in the $85 - $105 range, which is in line with current market expectation of a premium to the initial Broadcom offer.
Broadcom’s $130B offer slightly surpasses Qualcomm’s market value of capital of $123B, a 5.6% premium. Given that M&A premiums are typically in the 25% - 35% range and markets are surging, Qualcomm is right to wait for the right offer. The lower M&A offer with a 25% premium would be $153.75B, which translates to a value of $89.50 per share. The upper band, a 35% premium, translates to $166.05B offer and a price of $97.81 per share.
Evaluating Broadcom's Qualcomm Acquisition Offer
Dec. 7, 2017 3:53 PM ET
| About: Qualcomm Inc. (QCOM), Includes: AVGO
by: Javier Rojas