One of the key defences put up by Qualcomm to the Broadcom bid is that a takeover is unlikely to get regulatory approval.

The size of this failure fee shows that  Broadcom is confident of getting approval and is an incentive to Qualcomm shareholders to vote to replace Qualcomm’s board with  a Broadcom-nominated board at the Qualcomm AGM on March 6th.

The two companies meet on Wednesday to discuss the bid.

Meanwhile Broadcom is said to have raised $100 billion debt to finance the bid with private equity companies KKR and CVC joining SilverLake in support of the deal.

This is the letter:

February 8, 2018
Dr. Paul E. Jacobs
Executive Chairman of the Board of Directors
Qualcomm Incorporated
5775 Morehouse Drive
San Diego, CA 92121

Dear Dr. Jacobs:
Broadcom has long sought a meeting to discuss Broadcom’s acquisition of Qualcomm. Following Qualcomm’s announcement today that it is willing to meet with us, we offered to meet with Qualcomm on Friday, Saturday or Sunday. I was astonished to hear that Qualcomm is not willing to meet until Tuesday – only after Qualcomm’s and Broadcom’s respective meetings with Glass Lewis and ISS. We hope that your willingness to meet with us reflects Qualcomm’s genuine intent to reach an agreement with respect to our February 5 proposal. After having met with most of your largest stockholders this past week, we have no doubt that this is their strong desire as well. We urge you to meet with us without further delay, and stand ready to meet this Saturday or Sunday in New York or another mutually convenient location.
To make our meeting more productive, we are providing you with a proposed merger agreement that we are prepared to enter into. As you will see, the agreement is highly favorable to Qualcomm and its stockholders and includes an $8 billion regulatory reverse termination fee and a 6% per annum regulatory ticking fee on the cash portion of the merger consideration (net of dividends). We want to reiterate that $82 per Qualcomm share is our best and final offer.
We look forward to meeting with you promptly.
This letter does not constitute a binding obligation or commitment of either company to proceed with any transaction. No such obligations will in any event be imposed on either party unless and until a mutually acceptable definitive agreement is formally entered into by both parties.

Sincerely

Hock Tan

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