Government Worries China Will Profit From Hostile Takeover Of US Company

Government Worries China Will Profit From Hostile Takeover Of US Company

Qualcomm quickly responded with a statement accusing Broadcom of continuing a "now familiar pattern of deliberately seeking to mislead shareholders and the general public by using rhetoric rather than substance to trivialise and ignore serious regulatory and national security issues".

The government action on March 4 highlighted growing US concerns about safeguarding semiconductor technology and cast a doubt on the deal's success.

Qualcomm stated on 5 March that "Broadcom's claims that the CFIUS inquiry was a surprise to them has no basis in fact". "Given well-known USA national security concerns about Huawei and other Chinese telecommunications companies, a shift to Chinese dominance in 5G would have substantial negative national security consequences for the United States". Broadcom is also looking to become a US company registered in business friendly DE, before the stockholder vote.

The Treasury Department is one of the agencies that make up the Committee on Foreign Investment in the US (CFIUS), which ordered a national security review of the proposed deal on Sunday.

The letter said that, as with every investigation, the review will look at the potential risk of an unnamed "actor" working through Broadcom to hurt United States national security, adding that the bulk of CFIUS' concerns were classified.

Huawei has been forging closer commercial ties with big telecom operators across Europe and Asia, putting the company in prime position to lead the global race for 5G networks despite U.S. concerns.

The U.S. "has identified potential national security concerns that warrant a full investigation of the proposed transaction", Treasury said.

"It should be clear to everyone that this is part of an unprecedented effort by Qualcomm to disenfranchise its own stockholders", said Broadcom. Ordinarily, it only weighs in after a deal is agreed upon - and can recommend that the president block any deal it considers a threat.

Broadcom said on March 5 that CFIUS' intervention was the result of secret moves made by Qualcomm on January 29 to seek an investigation into the offer, which Qualcomm's board has said significantly undervalues the company. With 11 seats on the Board, Broadcom lobbed in a slate of 6 candidates, hoping that it could win control of Qualcomm and rubber stamp Broadcom's $117 billion bid for the Snapdragon chip designer.

Before Broadcom disclosed its buyout offer for Qualcomm in November, Trump himself announced Broadcom's plan to shift its headquarters back to the United States after a White House meeting with CEO (chief executive officer) Hock Tan, a Malaysia-born businessman.

Singapore-based Broadcom has been working for weeks on a takeover of rival Qualcomm. Broadcom is based in Singapore.

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