US security panel deals major blow to Broadcom bid for Qualcomm

US security panel deals major blow to Broadcom bid for Qualcomm

During a public ceremony at the White House Nov. 2, Broadcom CEO Hock Tan announced to President Donald Trump and others that he would be moving his company to the U.S. That announcement came as CFIUS was reviewing another merger proposal, Broadcom's bid to purchase Brocade Communications Systems.

"This measure will afford CFIUS the ability to investigate fully Broadcom's proposed acquisition of Qualcomm", the U.S. Treasury Department, which oversees CFIUS, said in a statement.

Qualcomm said the meeting will be opened on March 6 at 8 a.m. and immediately adjourned to April 5. This will give it the thrust to push forward with the hostile takeover, even as the Committee on Foreign Investment in the United States is forcing a 30-delay in the meeting at which the vote will take place.

The semiconductor industry is locked in a race to develop chips that power so-called 5G wireless technology, allowing the transmission of data at faster speeds.

Federal regulators have ordered San Diego-based Qualcomm to postpone a stockholders vote on whether to sell the company to rival chip maker Broadcom, due to national security concerns raised by several members of Congress. The current US government has shown itself to be exceedingly wary of foreign technology investment, as indicated by its recent shut-out of Chinese telecom infrastructure company Huawei. "They would just have to buy Huawei (equipment)".

Qualcomm filed a voluntary request for CFIUS to review Broadcom's bid on January 29. In the letter, Cornyn also noted Qualcomm's significant role in the development of 5G technologies and that the United States is competing against China in this field. 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".

The involvement of CFIUS marks a major blow to the deal. Qualcomm is right to oppose this greed-motivated deal.

Qualcomm's shares fell 4 percent in trading before the bell.

Cornyn said on Monday he was glad CFIUS had chose to review the deal, noting aggression by "international rivals, like China". But it now appears willing to continue to pursue its bid for Qualcomm through the foreign-investment committee review, said Bernstein research analyst Stacy Rasgon in a research note.

"This is a very serious matter for both Qualcomm and Broadcom", the San Diego company said in a statement. Broadcom shareholders are expected to vote on the move in early May.

"Broadcom, which is run by a Board of Directors and senior management team consisting nearly entirely of Americans, and which is largely owned by the same United States institutional investors that own Qualcomm, recognizes the important role CFIUS plays in protecting our national security, and is fully committed to cooperating with CFIUS in any review, just as Broadcom did during its prior successful acquisitions, including its acquisition of Brocade at the end of 2017", Broadcom wrote in its release.

Broadcom said on Monday it is run by a board and senior management team consisting nearly entirely of Americans and is largely owned by the same US institutional investors that own Qualcomm.

Related Articles