Qualcomm has just released a statement about the Qualcomm Incorporated Non-Executive Officer Change in Control Severance Plan.
In short, the plan is designed to calm the troops of Qualcomm while they are under hostile take-over threat from Broadcom. The plan is put into motion if there is a change in control of the company which includes a takeover by Broadcom.
The plan secures the employees below the executive level an extra severance pay if they are fired without cause within a two year period after the change of control. The severance pay is calculated by multiplying the numbers of years served by 2 weeks pay plus 4 to 16 weeks extra pay based on the level in the organization. Health care is covered for a similar period.
A midlevel employee with 10 years of service would get 28 weeks of extra pay while a high level employee with 20 years service would get 56 weeks of pay. High-level employees would get a minimum of 52 weeks pay irrespective of the number of years served while low-level employees between 26 and 2 weeks.
Qualcomm has taken a Poisoned Pill
To acquire a competitive company you need to pay more than it is worth but the logic should be that you are able to find synergies that can lower the costs of the combined company. The first casualties of the synergy process are staff functions and management positions. Apart from calming their own troops, Qualcomm has made it significantly more difficult for Broadcom to fire people following a merger synergy process.
This is further complicated by the pending Qualcomm acquisition of NXP and the fact that Broadcom has a significantly smaller number of employees than Qualcomm and NXP. It would be even worse for Broadcom if Qualcomm managed to finalize the NXP merger – then only 1 out of 7 employees would be Broadcom employees.
The Qualcomm plan can be seen here
You can find our merger factbook here