Under Threat of Takeover, Qualcomm Rushes a Severance Plan
Qualcomm has established a new severance program for non-executive employees that's triggered by a change of control as it faces a hostile takeover bid from rival Broadcom.
The San Diego wireless technology giant revealed the severance package in a filing with federal securities regulators on Dec. 22. It was unanimously adopted by the company's board of directors.
Qualcomm contends the hostile takeover attempt by Broadcom may "result in the loss or distraction" of valuable employees, as well as make it harder to recruit workers.
The change of control plan -- which would last for two years after a takeover -- sets out severance formulas for employees below the rank of executive vice president who might be laid off as a result of a Broadcom acquisition.
The plan "is an action many companies take to help with retention of employees as it provides financial support if their position were eliminated within a certain period of time after a change in control," wrote Michelle Sterling, executive vice president for human resources, in an email to employees. "It also helps mitigate concerns that job candidates might have about joining Qualcomm during this period of uncertainty."
A Broadcom spokesman said the company continues to hope Qualcomm's board would engage in merger talks but declined further comment. A Qualcomm spokeswoman declined to comment beyond the regulatory filings.
In November, Broadcom made an unsolicited bid to buy Qualcomm for $70 a share -- or roughly $103 billion. Qualcomm's board rejected the offer. Broadcom subsequently nominated 11 alternative candidates to replace Qualcomm's entire board of directors. Shareholders will vote on either Broadcom's or Qualcomm's board candidates ahead of its March 6 annual shareholder meeting.
The new severance plan defines change of control to include a replacement of a majority of Qualcomm's current board of directors.
Broadcom Chief Executive Hock Tan has a reputation for tightly controlling costs. He has grown Broadcom through a series of acquisitions, which typically result in job losses and selling off unwanted divisions.
The severance plan could make the acquisition of Qualcomm more expensive for Tan.
It sets cash severance for non-executive employees based on years of service. It also establishes a minimum amount of severance -- ranging from four weeks of base salary for administrative workers, 16 weeks for managers and 52 weeks for senior vice presidents.
The two-year duration could aim to make sure the severance plan remains intact during an expected lengthy, global antitrust review of a potential Broadcom takeover of Qualcomm.
Qualcomm currently employs 33,000 workers globally. It is awaiting final regulatory approval for its $38 billion acquisition of Dutch automotive chip maker NXP Semiconductors, which has 31,000 workers.
Broadcom said its $70 per share offer for Qualcomm stands whether or not the NXP deal closes at its current price.
Change of control severance programs have been adopted by companies seeking to fend off acquisitions, including Yahoo! in a 2008 takeover attempt by Microsoft. Some activist investors have criticized such moves as defense tactics that aren't in the best interests of shareholders.
Qualcomm's shares ended trading Tuesday down a penny at $65.26 on the Nasdaq Exchange.
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