Massive Qualcomm takeover is on hold after United States government intervention

Mar 06, 2018, 01:28
Massive Qualcomm takeover is on hold after United States government intervention

A USA national security panel on Sunday ordered Qualcomm Inc (QCOM.O) to put off its March 6 annual shareholder meeting by a month, delaying a long awaited showdown in the company's attempt to fend off a takeover by Singapore-based Broadcom Ltd (AVGO.O).

The Committee on Foreign Investment in the United States, which has the power to stop deals that could harm national security, asked Qualcomm to postpone the annual meeting and election of directors by 30 days to give it the ability to investigate the proposed acquisition.

"This was a blatant, desperate act by Qualcomm to entrench its incumbent board of directors and prevent its own stockholders from voting for Broadcom's independent director nominees", Broadcom said in a statement.

"Broadcom has been interacting with CFIUS for weeks and made two written submissions to CFIUS", the Qualcomm statement said.

Broadcom had not claimed that it was surprised by the CFIUS investigation, but that it had not known that Qualcomm's voluntary request was behind the probe.

Qualcomm officials said that notwithstanding Broadcom's dismissive rhetoric, "this is a very serious matter for both" companies. Broadcom "expects to complete its redomiciliation process to the U.S.by May 6, at which point the proposed acquisition will not be a CFIUS covered transaction", Zino wrote in a report on Monday.

Broadcom, which has prompted the concerns due to the fact that it is based in Singapore, slammed Qualcomm for involving Cfius. Broadcom then reduced its offer for Qualcomm to $79 a share.

Cornyn said Qualcomm is the leading USA company in driving 5G development, and an acquisition by Broadcom could stall that and hand the leadership of 5G R&D to Huawei, a Chinese tech firm.

Broadcom has said that its chief executive, Hock Tan, and most of its senior management are American, and that they plan to relocate the company to the U.S.

The Qualcomm statement said CFIUS is an independent governmental body charged with protecting USA national security and "has determined that there are national security risks to the United States as a result of and in connection with the transaction proposed by Broadcom". "The U.S.is now in a race with China in the development of 5G technologies, a race that will have profound impact on critical U.S. telecommunications infrastructure and on U.S. national security for years to come".

Broadcom's proposed takeover of Qualcomm would be the largest deal ever in semiconductors, creating a chip juggernaut with a leading market position in many top chips used in smartphones.

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