United States regulators ask Qualcomm to delay shareholder meeting


That prompted a fusillade from Broadcom, with an equally accusatory response from Qualcomm. The current USA 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.

However, the pre-deal discussions by CFIUS - which are extremely rare - suggest Broadcom's plans to move its headquarters may not be enough to sidestep a national security review that could threaten the deal.

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.

Broadcom has nominated six alternative candidates to Qualcomm's 11-member board of directors in a hostile takeover bid.

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. 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. The order was placed to allow the subsidiary of the Treasury Department to investigate the acquisition maneuvers of Singapore-based Broadcom.

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.

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In a rare intervention by the government, the Trump administration moved Sunday night to stall the potential takeover of Qualcomm, the leading US chipmaker, by Singapore-based Broadcom on national-security grounds.

The vote was set to take place Tuesday at Qualcomm's annual shareholders meeting. Whether that contact would have led the CFIUS to tip off an impending investigation of the deal to Broadcom is another question.

Broadcom shares closed down 1.6%, while Qualcomm fell 1.3%.

"This can only be seen as an intentional lack of disclosure, both to Broadcom and to its own stockholders".

Unfortunately for Broadcom, that last point is playing out already due to action taken by the Committee on Foreign Investment in the United States (CFIUS). The company is now based in Singapore but late previous year promised to move its headquarters to the United States.

With the committee examining the deal, Qualcomm now can work to close its pending $43 billion acquisition of NXP Semiconductors to diversify its business beyond smartphones, attempt to make progress on patent licensing disputes with Apple and try to construct a stronger case to shareholders to remain a stand-alone company, said Rasgon.