IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

Arun has over 15 years’ experience covering the Technology sector. During this time, he has worked with technology start-ups and as an equity analyst in investment banks and independent research firms. He was formerly a Technology Analyst for Canaccord Genuity, Altium Securities, Espirito Santo Investment Bank, Noble Group and Clear Capital. He has a dual Master’s degree in Financial Engineering and Industrial and Operations Engineering from the University of Michigan. He obtained his Bachelor’s degree in Mechanical Engineering from the Indian Institute of Technology, Bombay. He is also a CFA charterholder.

IPOs and Catalysts/Events

Opportunistic and Undervalued Broadcom Bid

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

On Monday, Elliott Management, which owns 6% of <a href="https://www.smartkarma.com/entities/9801" target="_blank" data-smartkarma-citation="entities:9801:1">NXP Semiconductors NV (NXPI US)</a>, released a letter saying Qualcomm’s existing $110 per share offer to buy NXP is too low. Elliott values NXP at $135 per share excluding any control premium and launched <a href="https://www.fairvaluefornxp.com/" target="_blank">www.FairValueForNXP.com</a> to help NXP shareholders “to unlock a material valuation gap”. Qualcomm quickly responded with a brief press release, sticking with its tired script that “the agreed-upon price of $110 is full and fair”.We believe that there is one real winner in the latest twist in the Broadcom/Qualcomm/NXP acquisition saga and that is <a href="https://www.smartkarma.com/entities/998" target="_blank" data-smartkarma-citation="entities:998:1">Broadcom Limited (AVGO US)</a>:<ol><li>The rationale behind Elliott’s $135 per share valuation is compelling and will be difficult for NXP shareholders to dismiss as unrealistic.</li><li>In addition, Elliott hints that the $135 per share valuation is probably conservative as consensus 2018 EPS of $7.23 is stale and too low. Elliott’s 2018 EPS estimate of $7.76 is 7% higher than consensus, implying an intrinsic value of $145 per share.</li><li>Qualcomm needs to get 80% of NXP shareholders to tender their shares for the proposed acquisition to be effective. Qualcomm’s $110 per share bid for NXP has only 2.4% acceptance (tendered shares) from NXP shareholders. Press reports suggest that Elliott is working with several other large holders of NXP, such as hedge fund D.E. Shaw, which would enable it to cross the 20% threshold.</li><li>We believe Qualcomm will struggle to persuade its shareholders that bidding over the odds for NXP, an acquisition with uncertain regulatory timelines and which will result in Broadcom walking away or bidding less than fair value for standalone Qualcomm, will generate superior shareholder returns.</li></ol>

On Monday, Elliott Management, which owns 6% of NXP Semiconductors NV (NXPI US), released a letter saying Qualcomm’s existing $110 per share offer to buy NXP is too low. Elliott values NXP at $135 per share excluding any control premium and launched www.FairValueForNXP.com to help NXP shareholders “to unlock a material valuation gap”. Qualcomm quickly responded with a brief press release, sticking with its tired script that “the agreed-upon price of $110 is full and fair”.We believe that there is one real winner in the latest twist in the Broadcom/Qualcomm/NXP acquisition saga and that is Broadcom Limited (AVGO US):The rationale behind Elliott’s $135 per share valuation is compelling and will be difficult for NXP shareholders to dismiss as unrealistic.In addition, Elliott hints that the $135 per share valuation is probably conservative as consensus 2018 EPS of $7.23 is stale and too low. Elliott’s 2018 EPS estimate of $7.76 is 7% higher than consensus, implying an intrinsic value of $145 per share.Qualcomm needs to get 80% of NXP shareholders to tender their shares for the proposed acquisition to be effective. Qualcomm’s $110 per share bid for NXP has only 2.4% acceptance (tendered shares) from NXP shareholders. Press reports suggest that Elliott is working with several other large holders of NXP, such as hedge fund D.E. Shaw, which would enable it to cross the 20% threshold.We believe Qualcomm will struggle to persuade its shareholders that bidding over the odds for NXP, an acquisition with uncertain regulatory timelines and which will result in Broadcom walking away or bidding less than fair value for standalone Qualcomm, will generate superior shareholder returns.

Qualcomm: Pinned into an Uncomfortably Tight Corner, Elliott Values NXP at $135 Per Share

Qualcomm Inc

Qualcomm: Pinned into an Uncomfortably Tight Corner, Elliott Values NXP at $135 Per Share