Qualcomm is going to do whatever it takes to fend off Broadcom

Mike Blake/Reuters

Qualcomm CEO Steven Mollenkopf

• Broadcom on Monday offered to buy Qualcomm in what would be the largest tech deal on record.
• Qualcomm is set to reject the unsolicited offer, according to several reports.
• This sets Broadcom up to start a hostile takeover campaign for its rival, which has been rattled recently by a lawsuit with Apple over licensing fees.
• Qualcomm shares on Monday traded below the offer price of about $70 per share, suggesting that traders were skeptical.

The semiconductor giant Broadcom is set to enter a tasking campaign in its bid to buy Qualcomm.

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Earlier on Monday, Broadcom said it made a $70-per-share offer to Qualcomm shareholders that consists of $60 in cash and $10 in Broadcom shares. If approved, it would be the largest-ever tech acquisition, surpassing the $60 billion tie-up between Dell and EMC in 2016.

But Qualcomm is poised to reject the unsolicited offer worth $103 billion, according to the Financial Times.

The offer price undervalues Qualcomm and is below what its board would seriously consider, the FT reported. That's in spite of the 28% premium that Broadcom's offer places on Qualcomm's closing price Thursday, the eve of the first news report on the deal.

Qualcomm said Monday that its directors were assessing Broadcom's bid and would act in their shareholders' best interest.

Meanwhile, Broadcom is getting ready for a proxy battle and may make its pitch directly to Qualcomm shareholders if the board rejects the deal, Bloomberg reported. Another tactic Broadcom could use is to nominate directors for Qualcomm's board ahead of the company's annual general meeting in 2018.

Traders are skeptical of Broadcom's chances. The stock gained again on Monday, but only to as high as $65.32 a share just before noon in New York. That's still shy of the offer price and indicates that traders are playing it safe.

Broadcom's bid is a very ambitious attempt to grow its share of the market for components that go into mobile phones. It's also a timely bid Qualcomm, whose earnings this year have been hurt by a global legal fight with Apple over its licensing fees for patents. The combined company would be third-largest chipmaker behind Intel and Samsung. But that's almost certain to draw the ire of the US Department of Justice for antitrust concerns.