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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.

"Chipmaker Broadcom officially unveiled a $130bn offer, including net debt, for Qualcomm on Monday, in what could be the largest tech deal in history". We note that Broadcom's bid is independent of Qualcomm's success in closing its bid for NXP. According to CNBC, Broadcom brought the offer to Qualcomm privately more than a year ago but was rebuffed. At $70 a share, an offer would value Qualcomm at $103 billion.

The bid comes as Broadcom plans to move its headquarters to the United States from Singapore.

In a statement about its proposal, Broadcom president and CEO Hock Tan flagged "greater scale and broader product diversification" as key strategic drivers for the offer.

Broadcom's acquisition would be the most ambitious move by Tan, who has turned a small, scrappy chipmaker into a $100-billion company with a string of deals, since he took the helm a decade ago.

Qualcomm is trying to close its $38-billion acquisition of NXP Semiconductors NV, one of the largest makers of chips for vehicles and expanding into self-driving technology.

According to sources Qualcomm is not aware of the details of Broadcom's bid and the company has yet to make any comment.

That will help it avoid a cumbersome federal review process for a $5.5 billion deal for USA network provider Brocade Communications Systems. Moreover, it would create a company with "massive market share" in the kind of chips that power Wi-Fi, location data and Bluetooth, necessary for the next generation of connected devices, said Stuart Carlaw, chief research officer at ABI Research.


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