President Donald Trump Just Killed Broadcom's Proposed Takeover of Qualcomm

14 March, 2018, 00:24 | Author: Jason Torres
  • Broadcom CEO Making America home again

In a letter on March 5, CFIUS wrote to Broadcom's lawyers saying that on March 4, it had issued an interim order prohibiting Broadcom from taking control of Qualcomm by electing a majority of the company's directors, as it proposed to do in a filing with the U.S. Securities and Exchange Commission on February 20.

The President of the United States, Donald Trump, just became a temporary roadblock for chipmaker Broadcom and its bid to acquire the biggest smartphone chipset manufacturer in the world, Qualcomm.

An investigation into the deal by the Committee on Foreign Investment in the United States (CFIUS) announced last week, was - claimed Broadcom - initiated following a complaint by Qualcomm directly.

In January, Trump's national security team considered nationalizing a 5G network to counter China's threat to US cybersecurity.

The order also said that Broadcom's avgo 15 proposed candidates to Qualcomm's board of directors have been "disqualified", Qualcomm has previously rejected Broadcom's proposed director nominees to its board.

Tan bought California-based companies Broadcom for $37 billion in a leveraged deal in 2015 and Brocade Communications in a $5.5 billion deal two years later.

The US Treasury Department warned in a letter made public in early March that since Broadcom was financing the deal with over $100 billion in debt, it would be under pressure to squeeze more profits out of Qualcomm.

If Broadcom successfully relocates to the U.S., it would escape the jurisdiction of CFIUS, but for the time being Trump's order has put a hard stop on the company's ambition to acquire Qualcomm in any case. If Broadcom fails to get approval even after shifting the headquarters, then the company would possibly take the matter to court.

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The panel had already signaled that it might recommend that the deal be blocked.

A deal between Qualcomm and Broadcom could have given Huawei the chance to take over the top spot eventually.

Trump issued an executive order on Monday that prohibits Broadcom from acquiring Qualcomm for roughly $117 billion, citing national security concerns. Shares of Broadcom rose less than 1 percent.

US President Donald Trump's decision to stall Singapore-based Broadcom from pursuing a takeover of San Diego-based Qualcomm has left many puzzled.

"Broadcom strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns", a Broadcom statement notes.

"Concern has expanded from existing technologies with national security implications potentially falling into rivals' hands to ensuring American companies continue to invest in R&D to maintain their technological edge", he said. CFIUS cited Broadcom's thrifty approach to R&D and argued that the Singapore-based company would likely cut costs at Qualcomm, which would in turn weaken its ability to compete against Chinese telecoms rivals such as Huawei.

Qualcomm and Broadcom did not immediately respond to requests for comment Monday night.

However, it's also possible that Trump's decision may also be an attempt to maintain healthy market competition in the U.S., given that a takeover would have created the world's third-largest semiconductor firm behind only Intel domestically, and Samsung internationally.


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