The drama between Qualcomm Inc. (QCOM - Get Report) and Broadcom Ltd. (AVGO - Get Report) continued Monday, Feb. 26, with the latter accusing the former of playing at "engagement theater" rather than engaging in real negotiations.
Earlier on Monday, Qualcomm chairman Paul Jacobs sent Broadcom CEO Hock Tan a letter proposing that the companies sign non-disclosure agreement and iron out wide-ranging disagreements on regulatory strategy, the target's licensing business and price.
The hostile suitor questioned Qualcomm's sincerity. "While Broadcom repeatedly attempts genuine engagement with Qualcomm, including having proposed constructive solutions to Qualcomm's concerns and having demonstrated flexibility at meetings on both February 14 and February 23, Qualcomm has only feigned engagement," Broadcom responded, suggesting that Qualcomm plans to delay its March 6 annual meeting.
In a response to Broadcom's follow up late on Monday, Qualcomm called the suitor's statement "disingenuous" and accused Broadcom of not engaging with it in any discussions on price. Qualcomm also denied that it had any intention of delaying its annual meeting, as Broadcom had suggested.
Shares of Qualcomm closed up nearly 5.8% to $66.98 on Monday, as the Financial Times reported that the company wants more than $90 per share for a total valuation of $160 billion, including assumed debt. The bid currently stands at $143 billion to $149 billion, depending on interpretation of debt in Qualcomm's acquisition of NXP Semiconductors NV (NXPI - Get Report) .
Broadcom dropped 0.3% to close at $252.95 on Monday.
Qualccomm's board may be posturing for shareholders; the company made a substantial change in its demands. The company said it would drop a requirement that Broadcom provide a "hell and high water" clause, essentially guaranteeing that the buyer would take any step including asset sales to ensure regulatory approval.
The San Diego chipmaker had previously maintained that Broadcom's offer required too great a regulatory risk. Qualcomm and its shareholders could slog through an 18-month regulatory review only to have the deal terminated by regulators.
Broadcom had offered an $8 billion reverse-breakup fee to assuage such doubts.
Qualcomm said Monday that it wants a reverse-termination fee of 9% of enterprise value, including the net debt that the buyer would assume, if it cannot get regulatory clearance.
While Broadcom has not outlined the enterprise value of its bid, the offer of $79 per share values Qualcomm's total equity at $118 billion. Broadcom had initially offered $82 per share, but reduced its bid on Wednesday after Qualcomm increased the price of its acquisition of NXP to $45 billion in cash.
Broadcom's initial bid projected that Qualcomm would have $25 billion in net debt after acquiring NXP. The new purchase agreement raised the price by about $6 billion. Whether Qualcomm issues more debt or spends more of its cash, the higher price tag will increase its net debt and would imply an enterprise value of about $149 billion.
At that level, the breakup fee would be $13.4 billion.
Broadcom suggested that Qualcomm is only open to talks because it is "finally beginning to recognize the will of its stockholders" as a March 6 annual meeting looms.
The hostile suitor has nominated six directors for Qualcomm's board, and has some support from third parties. Institutional Shareholder Services Inc. recommends that Qualcomm shareholders appoint four of Broadcom's directors, while Glass, Lewis & Co. LLC endorses all six.
The two sides have a little more than a week to negotiate and/or continue sending dueling press releases.
Broadcom does not trust Qualcomm's board, which it described as "disingenuous" in Monday's statement. Depending on the outcome of the March 6 meeting, the company could have a different set of negotiating partners.
"If the current Qualcomm board remains unwilling to genuinely engage—and continues with 'engagement theater' on this basis—Broadcom looks forward to negotiating in good faith with the newly-elected Qualcomm board following the Qualcomm annual meeting on March 6," Broadcom said.
Qualcomm's annual meeting had appeared to be a final scene in the dispute between Jacobs and Tan. If Broadcom wins a minority slate and gains a voice on Qualcomm's board, another act may follow.
Editor's note: This article was originally published by The Deal, a sister publication of TheStreet that offers sophisticated insight and analysis on all types of deals, from inception to integration. Click here for a free trial.