Semiconductor company Broadcom made the rumor a reality today by offering to acquire San Diego chipmaker Qualcomm for $70 per share in cash and stock.  The deal, which Broadcom estimates is worth approximately $130 billion on a pro forma basis, includes $25 billion of net debt because of Qualcomm’s pending acquisition of NXP.

Under the deal, the $70 per share that Qualcomm stockholders would receive will consist of $60 per share in cash and $10 per share in Broadcom shares.

Broadcom said that its offer represents a 28 percent premium over the closing price of Qualcomm’s stock on Nov. 2 and a 33 percent premium over Qualcomm’s 30-day average stock price.

Qualcomm’s stock was trading up 1.48 percent at mid-day to $62.71 per share. Its previous day’s close was $61.81. Broadcom, meanwhile, was trading at $271.01 per share at mid-day, down slightly from its previous day’s close of $273.63.

In a letter to Qualcomm’s board of directors, Broadcom CEO Hock Tan alluded to prior discussions with Qualcomm CEO Steve Mollenkopf about combining the two companies. “Since I discussed a combination with Steve in August of last year, Broadcom has successfully completed the integration of the Broadcom-Avago combination, de-levered its balance sheet, and meaningfully increased revenues and profitability,” Tan said. “As a result, Broadcom stockholders have been rewarded with a 55 percent appreciation in Broadcom’s stock price since that time, ranking in the top 10 percent among the S&P 500 over that period.”

Broadcom also said the proposed deal will not be subject to any financing conditions. BofA Merrill Lynch, Citi, Deutsche Bank, J.P. Morgan, and Morgan Stanley have advised Broadcom that they are confident they will be able to arrange debt financing. In addition, Silver Lake Partners, a Broadcom strategic partner, has committed to $5 billion of convertible debt financing for the deal.

In a statement, Qualcomm said its board is assessing the proposal, and the company will not comment until the board has completed its review of the offer.

Qualcomm is in the midst of acquiring NXP Semiconductors in a $38 billion deal that was announced about a year ago. The deal is expected to close by year-end.  However, since that acquisition was announced, the company has been under fire.

Earlier this month it was fined about $773 million by the Taiwanese government for allegedly violating the country's patent licensing laws. Qualcomm said it planned to appeal.

Qualcomm also is facing problems with Apple. It has worked with Apple for a decade and made chipsets for its iPhone. However, the two companies have been embroiled in a lawsuit after Apple accused Qualcomm of using its market dominance to charge extremely high patent royalties and keep competitors away. Apple has recently signaled that it may be looking at other chipset providers for future versions of the iPhone.

According to ABI analyst Stuart Carlaw, these factors and others have caused Qualcomm’s stock price to become depressed, which makes this an opportunistic move for Broadcom. “I think we may see a split among shareholders with some viewing this as an opportunity to smooth relations with Apple,” he said in an interview with SDxCentral.

He also noted that if the acquisition should progress, it would likely be subject to regulatory review because of anti-competitive issues. The combination of Broadcom and Qualcomm would create a combined market share of 59 percent in the WiFi chip space, and 67 percent market share in location chipsets. Plus, Carlaw said that Broadcom has a historically strong position in automotive semiconductors and when combined with NXP’s strength in automotive it would easily give the combined company a huge chunk of the market.

However, Jim McGregor, principal analyst with TIRIAS Research, said that Broadcom could break-up Qualcomm and sell off business units to meet regulatory requirements. Nevertheless, he said he thinks this acquisition is a bad deal because Broadcom is not a research and development (R&D) company and if it purchases Qualcomm, that will leave a gaping hole in the industry in terms of future R&D.