Tuesday, 19 June, 2018

U.S. government halts Qualcomm-Broadcom action amid national security concerns

Qualcomm building is shown in San Diego California U.S. Mike B  REU Qualcomm building is shown in San Diego California U.S. Mike B REU
Camille Neal | 07 March, 2018, 00:24

Some critics of Broadcom's merger plans say that domestic control of that technology is an important to maintaining national security and maintaining a stake in the future of 5G technologies.

"We can not overstate the likely harm [from a Broadcom hostile takeover] that would result to Qualcomm, the USA company leading the development of 5G and other next-generation technologies, as well as to the United States security interests", said the Gallagher letter.

The entire CFIUS review could be moot once Broadcom moves its legal headquarters back to the United States, analyst Angelo Zino at CFRA Research, noted.

However, Bloomberg reports this afternoon that Broadcom is on course to win all six of the seats that it is seeking on Qualcomm's board.

The order by the Committee on Foreign Investment in the United States (CFIUS), which reviews deals that have potential national security implications, heightened tensions between the two companies that have been apparent since China-based Broadcom first proposed buying Qualcomm in November 2017 in what would be by far the largest deal in tech history.

Reuters reported last week that CFIUS had begun looking at Broadcom's bid amid growing pressure from lawmakers, including President Donald Trump's fellow Republicans in Congress.

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Broadcom most recently offered $79 per share, or $117 billion, for Qualcomm, lowering its previous bid of $82 per share, or $121 billion, after Qualcomm raised its own takeover bid for NXP Semiconductors. According to the NYT, the company "argued that its status as a soon-to-be American company means the deal should not be subject to review". In practice, reviews by CFIUS often lead to the demise of deals.

The government stepped in to effectively delay the apparent hostile takeover of US chipmaker Qualcomm by Singapore-based Broadcom Limited that would be the largest tech merger ever.

Qualcomm shares closed at $64.01 on Wall Street, down 73 cents.

"I support the idea that the committee on foreign investment takes a close look at that to see that American interests are protected", he added. The company is now based in Singapore but late a year ago promised to move its headquarters to the United States. "Upon completion of the redomiciliation, Broadcom's proposed acquisition of Qualcomm will not be a CFIUS covered transaction".

Qualcomm said it would comply with the order and delay its shareholder meeting at least 30 days. Qualcomm on Monday extended its $44 billion tender offer for NXP to March 9, as it awaits clearance from China's MOFCOM, the only regulator globally required to approve the deal that has yet to do so. "Broadcom was informed on Sunday night that on January 29, 2018, Qualcomm secretly filed a voluntary request with CFIUS to initiate an investigation, resulting in a delay of Qualcomm's annual meeting 48 hours before it was to take place", said Broadcom in a statement this morning.

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