One day after Singapore-based Broadcom ( AVGO ) announced plans to move its headquarters to the U.S., a news report circulated that the chipmaker wants to buy San Diego-based Qualcomm ( QCOM ) in a deal that would create a semiconductor powerhouse.
Bloomberg said Friday that Broadcom is consulting advisors about the possible megadeal. Broadcom has a market capitalization of about $117 billion, while Qualcomm has a market cap of roughly $92 billion.
Broadcom stock rose 5.5% to 273.63 on the stock market today . Qualcomm jumped 12.7% to 61.81.
Broadcom is rumored to be putting together a cash-and-stock bid worth $70 a share for Qualcomm, Bloomberg said.
Broadcom has a history of deal making, including its merger with Avago Technologies, completed in January 2016. Broadcom currently is in the process of buying Brocade Communications Systems ( BRCD ).
Broadcom first announced plans to buy Brocade last November in a $5.9 billion deal. But the companies have been tied up by regulatory reviews.
Broadcom's decision to move its headquarters to the U.S. could positively affect the Broadcom-Brocade deal, analysts say.
IBD'S TAKE:Broadcom has an IBD Composite Rating of 98, meaning it has outperformed 98% of stocks in key metrics over the past 12 months. For more analysis of Broadcom and its peers, visit the IBD Stock Checkup .
Last month, Broadcom pushed back the closing deadline because of a review by the Committee on Foreign Investment in the United States, the government agency that reviews national security implications of proposed foreign investments in U.S. companies. Broadcom and Brocade now expect the deal to close by Nov. 30.
Qualcomm has been hobbled by a legal fight with major customer Apple ( AAPL ) over patent licensing fees and terms. It also has run into problems trying to close its pending $47 billion purchase of NXP Semiconductors ( NXPI ). That deal is facing regulatory scrutiny in Europe and opposition from some NXP shareholders who argue that the offer undervalues NXP.
NXP shares fell 2.1% to 115.02 on Friday as investors weighed the possible impact of a Broadcom bid for Qualcomm.
Broadcom's headquarters move is designed to boost its merger prospects, Jefferies analyst Mark Lipacis said in a report Friday.
"We think the decision is rooted in the company's strategy to pursue M&A as a means to drive free cash flow, earnings per share and shareholder value, and in the political reality that it has become more difficult for overseas-based companies to acquire U.S. ones," Lipacis said. "We would not be surprised to see Broadcom continue to pursue large acquisitions, consistent with our thesis that the industry will continue to consolidate, and see an upward bias on gross and operating margins."
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