Thursday, 20 September, 2018

Broadcom-Qualcomm Takeover Blocked By White House on National Security Grounds

Broadcom-Qualcomm Takeover Blocked By White House on National Security Grounds Broadcom-Qualcomm Takeover Blocked By White House on National Security Grounds
Nellie Chapman | 13 March, 2018, 09:46

Qualcomm said late Monday that it received Trump's order, and that under the terms of the president's action, "all of Broadcom's director nominees are also disqualified from standing for election as directors of Qualcomm".

A source familiar with CFIUS' thinking had said that, if the deal was completed, the United States military was concerned that within 10 years,"there would essentially be a dominant player in all of these technologies and that's essentially Huawei, and then the American carriers would have no choice".

In a letter to both Qualcomm and Broadcom dated Sunday, the U.S. Committee for Foreign Investment in the U.S. (CFIUS) accused Broadcom on three separate occasions of failing to provide five business days notice of its efforts to accelerate relocation of its headquarters to the U.S.

"Qualcomm has become well-known to, and trusted by, the US government", said Deputy Assistant Secretary for Investment Security Aimen Mir. While Broadcom's bid was active, its attempt to buy Qualcomm became the biggest soap opera on Wall Street.

Broadcom, incorporated in Singapore and co-headquartered there and in San Jose, California, denied this.

"In the absence of information that changes CFIUS's assessment of the national security risks posed by this transaction, CFIUS would consider taking further action, including but not limited to referring the transaction to the president for decision", treasury said in the letter, which Qualcomm made public earlier on Monday.

The Treasury Department letter was "obviously a poison pill", said Jim Lewis, a CFIUS expert at the Center for Strategic and International Studies, who described the communication to Broadcom as "unprecedented". The company's physical headquarters is already in San Jose, Calif. - about 450 miles from Qualcomm's headquarters in San Diego. CFIUS ordered the shareholder vote be postponed to investigate the transaction.

Despite a clampdown on highly public deals, other Chinese acquisitions are going through in sectors such as automobiles that are less closely related to national security and therefore do not require CFIUS approval.

For instance, the U.S. committee cleared Beijing-based Naura Microelectronics Equipment Co in January to buy United States semiconductor manufacturing equipment maker Akrion Systems LLC.

Broadcom said in a statement it is reviewing the order but emphasized it "strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns". "Broadcom's claims that the CFIUS inquiry was a surprise to them has no basis in fact", Qualcomm said in a statement.

Broadcom is headquartered in Singapore, but has a significant business presence and offices in the United States.

In a letter to both companies' attorneys last week, the interagency panel said it was concerned that Broadcom's takeover would put at risk USA efforts to build next-generation wireless networks, thereby giving Chinese firms the opportunity to take the lead.

A leader in wireless technology, including burgeoning fields such as 5G connectivity, Qualcomm had rejected Broadcom's bids for purchase. But Broadcom CEO Hock Tan's real goal was apparently to smooth the road for its hoped-for acquisition of Qualcomm.