Shares of mobile chipmaker Qualcomm (NASDAQ:QCOM) soared on Friday following reports that Broadcom (NASDAQ:AVGO) was exploring a deal to acquire the company. According to Bloomberg's sources, Broadcom could bid more than $100 billion for Qualcomm. At 2:45 p.m. EDT, Qualcomm stock was up about 13%, while Broadcom stock was up nearly 5%.
Broadcom is reportedly talking to advisors about a possible deal, with a cash-and-stock offer of around $70 per share being considered. No final decision has been made, and there's no guarantee that an offer will materialize.
Broadcom was formed in 2016 by the merger of Avago and the previous iteration of Broadcom, a $37 billion deal that created a semiconductor powerhouse. If Broadcom combines with Qualcomm, the resulting company would have annual revenue of around $35 billion.
If Broadcom does make an offer for Qualcomm, it's unclear how Qualcomm's ongoing effort to acquire NXP Semiconductors would be affected. Qualcomm has had to push back the anticipated closing of that deal due to regulatory scrutiny and opposition from shareholders.
Another wrinkle is Qualcomm's legal battle with Apple. Apple sued Qualcomm earlier this year, accusing the company of charging unfair royalties. Qualcomm was also charged by the Federal Trade Commission earlier this year with anti-competitive practices. Those lawsuits are likely to drag on for quite some time.
Qualcomm's current struggles, combined with possible regulatory headaches, would make a Broadcom-Qualcomm combination difficult to pull off. It's also unclear at this point how serious Broadcom is about making a bid.
An offer could come within the next few days, according to Bloomberg's sources. If Broadcom drops the effort, Qualcomm stock is unlikely to hold these gains.
Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool owns shares of Qualcomm and has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends Broadcom Ltd and NXP Semiconductors. The Motley Fool has a disclosure policy.