As Qualcomm Inc. (QCOM) heads towards a showdown at its March 6 annual meeting with hostile suitor Broadcom Ltd. (AVGO) , relations aren't getting warmer.

The San Diego chipmaker's board rejected Broadcom's unsolicited offer of $82 per share after the close on Thursday. Qualcomm said the bid provides no value for its pending purchase of NXP Semiconductors NV (NXPI) , for the resolution of licensing disputes with Apple Inc. (AAPL) and for the opportunity to sell a new generation of technology for 5G wireless networks.

Qualcomm gained nearly 0.9% to $62.95 after-hours after losing 4% during the trading session, and shares were up a similar amount in pre-market trading on Friday. Broadcom, which is asking Qualcomm shareholders to replace the company's board at the upcoming meeting, dropped 3.2% Thursday to $229.57, but was rising 1.2% in Friday pre-market trading.

Broadcom put Qualcomm's board in a difficult position on Monday, when it raised its offer from $70 per share to $82 just a month before the shareholder meeting. Qualcomm has not traded at that level since the first Internet boom about 18 years ago. 

"Given that the current price on the table, $82, is a big premium to where they were trading, they are probably feeling pressure from shareholders to at least do their fiduciary duty to see if they can get a higher price or greater commitments on the regulatory front," said Robert Lynch, director of research at Westchester Capital Management LLP, which holds about $192 million worth of NXP shares through its Merger Fund. 

NXP dropped 0.7% after hours Thursday to $115.15, which is still above Qualcomm's offer of $110. The stock had traded around $120 in recent weeks.

NXP presents an opportunity for Qualcomm to diversify in automotive technology and the Internet of Things, and lessen its dependence on the mobile phone business. "A tie-up with NXP not only would be highly accretive to Qualcomm's EPS in our view (but) it would (also) re-rate Qualcomm's multiple as well," said Steven Tan, Senior Equity Analyst & Director of Credit Research at Westchester Capital.

Qualcomm is certainly going to have to increase its bid for NXP if it expects to close the deal. Paul Singer's Elliott Management has publicly opposed Qualcomm's offer, saying NXP is worth $135 per share as a stand-alone company and deserves a premium.

Westchester Capital declined to specify a fair price for NXP but endorsed Elliott's position. "We believe their methodology is sound," Tan said.

Pressure to cut a deal with NXP shareholders will mount once Qualcomm gets a ruling from China, the last regulatory clearance it needs. Without the NXP deal, Qualcomm will go to its shareholder meeting without much to show while Broadcom can offer investors a takeout at a premium.

Broadcom previously said it will not raise its bid, and has not said what it would do if Qualcomm increases its offer to NXP.

Despite Qualcomm's pique, the company said it would meet with Broadcom to discuss the "serious deficiencies" of its offer. Along with price, Qualcomm argues that a merger with Broadcom would create antitrust issues because of the companies' overlap in components for high-end phones.

Westchester Capital's Tan suggested the regulatory reviews in China, the EU and U.S. for a merger with Broadcom could take 18 to 24 months. "NXP and Qualcomm, which we did not believe merited such scrutiny, is at over 15 months now for the regulatory bodies to review and China has not even signed off," he added.

Broadcom says it can complete a purchase of Qualcomm within 12 months, and has offered to pay an unspecified "ticking fee" if the deal takes longer. The company also offered a "significant" termination fee if it cannot obtain regulatory approvals.

So far, Qualcomm is not persuaded. Westchester Capital's Lynch said the company's concerns are legitimate.

"They risk losing [NXP] and then agreeing to a deal with Broadcom--and then a year and half from now they have nothing to show for it if it is blocked," Lynch said, suggesting the termination fee would not likely make up for the lost time and opportunity. 

"When they go into the annual meeting in early March," he said, "there has to be more certainty on (NXP)."

Broadcom, NXP and Apple are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells AVGO, NXPI or AAPL? Learn more now.

Editor's note: This article was originally published by The Deal, a sister publication of TheStreet that offers sophisticated insight and analysis on all types of deals, from inception to integration. Click here for a free trial.

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