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Qualcomm vows value creation to counter hostile Broadcom bid

(Bloomberg) -- Qualcomm Inc. has begun its public defense against the $105 billion hostile takeover attempt by Broadcom Ltd, asking shareholders to have confidence in management’s strategy and push aside the suitor.

In a letter to shareholders Tuesday, the company asked that its existing board be re-elected. Broadcom has introduced its own slate of board members in an effort to consummate what would be the biggest deal ever in the technology industry.

Qualcomm also highlighted a number of promises to shareholders. The San Diego-based company said it aims to post adjusted earnings per share of $6.75 to $7.50 in fiscal 2019 while continuing its current cost-cutting plan. Management also touted the “value creation” from its pending $47 billion acquisition of NXP Semiconductors NV -- or a "large share repurchase" if that deal doesn’t close.

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Pedestrians walk past signage displayed outside of Broadcom Ltd. headquarters in Irvine, California, U.S., on Monday, Nov. 6, 2017. Broadcom Ltd. and its advisers are gearing up for a proxy battle, making an appeal directly to shareholders, should Qualcomm Inc. reject its $105 billion takeover offer, according to a person with knowledge of the matter. Photographer: Patrick T. Fallon/Bloomberg

“Qualcomm has significant business momentum and the right strategy to create both near-term and long-term stockholder value -- far greater than Broadcom’s dramatically undervalued proposal,” according to the letter. “No matter how you look at it, Broadcom’s proposal is not worthy of discussion from a value perspective.”

Broadcom didn’t anticipate increasing its $70-a-share offer until closer to Qualcomm’s board meeting in March, people familiar with the matter said last month. Qualcomm’s stock, which has risen 2.1 percent in January, closed last week at $65.38.

The letter follows a change in Qualcomm’s severance plan that guarantees a payout to most employees who exit under certain circumstances after a majority change in the board or an acquisition.