Friday, 16 November, 2018

Broadcom's buyout of Qualcomm is likely to see even more delays

Broadcom's buyout of Qualcomm is likely to see even more delays Broadcom's buyout of Qualcomm is likely to see even more delays
Melinda Barton | 10 March, 2018, 01:04

The US government stepped in and stopped the deal over major concerns regarding national security, and now Broadcom is sweetening the deal with a $1.5 billion fund that would train new American engineers.

The Committee on Foreign Investment in the US (CFIUS) said in a letter, cited by the New York Times, that it believes that Broadcom's bid "could pose a risk to the national security of the United States". "Once they have control, the US government loses much of its leverage to force compliance and Broadcom has to know this". The company is now based in Singapore, but said in November that it will move its legal headquarters back to the United States.

Broadcom invests differently than Qualcomm, said McGregor.

Enderle questioned what is driving Broadcom to make its hostile takeover bid and said US regulators should work to see who might be behind the push, a question he said is of more importance than 5G.

Broadcom also stated that it would work with the government of United States as it drives to accomplish and sustain the global leadership in 5G.

CFIUS has the power to block acquisitions on national security grounds.

Tan also promised that if the deal goes through, the combined company will not sell any assets to foreign entities. China wants desperately to take the lead in technology from the US and 5G is only one of several areas they are eager to control.

CFIUS took the rare step this week of publicly intervening in the hostile takeover, ordering Qualcomm to postpone its annual shareholders meeting just days before it was scheduled to take place. It also noted that Qualcomm is facing scrutiny from regulators around the world about what some say are anticompetitive licensing agreements that the company uses to fund its R&D investments.

CFIUS, an inter-agency panel led by the U.S. Treasury, rarely reviews mergers before a deal has been clinched. They were to have voted on Broadcom's nominations for six replacement Qualcomm board members - if successful, the predator would have gained a potential majority on the 11-person board, paving the way for acceptance of its bid. FT continues: "Cfius took issue with Broadcom's "private equity-style" plans, which it wrote could lead to a reduction in Qualcomm's large research and development budget in favour of "short-term profitability".

Broadcom has a message for United States regulators: We'll make 5G technology a priority and invest in America if you let our bid for Qualcomm go through.

Broadcom shares are up 0.06% to $247.10.