Economy

US govt halts Qualcomm takeover by Broadcom

US govt halts Qualcomm takeover by Broadcom

"There is now a recognition in government that foreign investors, particularly from China, are getting more and more sophisticated on how they get access to technology in the U.S". The Committee on Foreign Investment in the United States is looking into a number of potential national security issues, according to the letter shared by Qualcomm. On Sunday, the government body ordered Qualcomm to delay its annual shareholder meeting, which had been scheduled for today and where investors were set to vote on the Broadcom bid through a proxy challenge.

A source said if the deal was completed, the U.S. military was concerned that within 10 years, "there would essentially be a dominant player in all of these technologies and that is essentially Huawei, and then the American carriers would have no choice".

The letter cited long-standing concerns about the security of Huawei and ZTE as telecom equipment providers.

"Qualcomm's work is too important to our national security to let it fall into the hands of a foreign company - and in a hostile takeover no less". The most common issue that has been raised is the impact on Qualcomm's development of the technologies needed to implement next-generation ("5G") wireless; 5G is central to pervasive streaming video, self-driving cars, and other technology advancements.

The order also requires Broadcom to give CFIUS five days of written notice before taking any action on the move of its headquarters to the U.S. In addition, it orders both companies to provide weekly updates of their actions to comply with the order. However, Qualcomm has been resisting Broadcom's overtures, prompting the latter to nominate six directors to Qualcomm's 11-member board at its shareholder meeting. "And, as we've seen, some of our global rivals, like China, have been incredibly aggressive and strategic", Cornyn said on Monday.

Broadcom said on Monday 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.

"This was a blatant, desperate act by Qualcomm to entrench its incumbent board of directors", the company said in a statement.

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The second is that the Qualcomm/Broadcom investigation occurs in the context of proposed reforms to the CFIUS process itself.

On that day, Broadcom Chief Executive Hock Tan stood in the White House and pledged to bring jobs to the U.S. - a move that won him praise from President Trump.

Broadcom said Tuesday it is cooperating with CFIUS. Qualcomm rejected, saying the price was way below decent.

Broadcom claims its board and senior management is nearly entirely American and that both it and Qualcomm are owned by the same USA institutional investors.

Qualcomm still is awaiting approval from regulators in China to acquire NXP. Broadcom's latest offer is $117 billion for Qualcomm.

Left-leaning analysts see this all as ironic.