Qualcomm expected to keep their extra m and say no to Broadcom

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Wireless chip manufacturer Broadcom has officially bid to buy its rival Qualcomm in a deal worth up to $130 billion.

It's not a done deal, however. However, according to the FT, Qualcomm is set to reject the deal, raising the prospect of a fight for the future of the company. We will maintain our fair value estimates of $68 for narrow-moat Qualcomm and $203 for narrow-moat Broadcom, but we would probably raise our fair value estimate for Broadcom-perhaps as much as 25%-if a definitive deal were reached.

The deal would dwarf Dell Inc.'s $67 billion acquisition of EMC in 2015 - then the biggest in the technology industry.

While the value of the proposed bid has yet to be made public it is expected that the offer will be in the range of around $70 to $80 per share, valuing Qualcomm at over $100billion.

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According to a report from Bloomberg, chipmaker Broadcom is launching an ambitious campaign to acquire Qualcomm, best known as the default System on a Chip (SoC) and cellular modem vendor in most smartphones.

Broadcom president and CEO Hock Tan called the proposal "compelling for stockholders and stakeholders in both companies", and claims a deal would position the combined company as "a global communications leader". Qualcomm is in the midst of its own acquisition with its purchase of NXP Semiconductors.

"Broadcom management comments about "confidence that our common global customers would embrace the proposed combination" could mean that the company has had discussions with large OEMs like Apple and Samsung".

Qualcomm has a (long) pending acquisition, of chipmaker NXP Semiconductors NV, in the works - and Broadcom notes that its offer is not dependent on whether or not Qualcomm manages to close with NXP on the now disclosed terms (it's offering ~$39BN for the Netherlands-based chipmaker which has a focus on car-related applications and also security-based identification).

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