U.S. could block Broadcom's Qualcomm deal over national security fears

Broadcom Qualcomm CFIUS

Broadcom Qualcomm CFIUS

"Qualcomm has become well-known to, and trusted by, the U.S. government", the U.S. Department of Treasury, which manages the CFIUS process, said in a letter to the companies Monday.

The government action on March 4 highlighted growing USA concerns about safeguarding semiconductor technology and cast a doubt on the deal's success.

"I'm glad they're taking a closer look at it. Qualcomm is a leader in 5G technology, which is going to be the new standard in the future", said Senator John Cornyn, the No. 2 Republican in the Senate, who had pushed for further review. The review will be conducted by the Committee on Foreign Investment in the United States (CIFUS), a body chaired by the US Treasury that can recommend deals be blocked. “This measure will afford CFIUS the ability to investigate fully Broadcoms proposed acquisition of Qualcomm, ” the U.S. Treasury Department stated.

USA government halts Qualcomm-Broadcom action amid national security concerns
Buying Qualcomm would make Broadcom the third-largest chip maker, behind Intel Corp. and Samsung Electronics Co. The annual meeting will be reconvened at 8:00am PST in San Diego, California, on April 5th .

In a letter to Qualcomm dated Monday, the Committee on Foreign Investment in the U.S. (CFIUS) said it was anxious Broadcom's takeover would threaten Qualcomm's investments in research and development, opening a doorway for China to overtake the U.S.in innovation.

Qualcomm is one of the leading players in the build-up to 5G networks (in partnership with Nokia), Huawei is the main competitor.

On Monday, Broadcom called Qualcomm's latest actions an effort to prevent Qualcomm shareholders from expressing their views on the takeover proposal.

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Broadcom offered $76 per share for Qualcomm last month. The panel also advised against a deal between Chinese-backed private equity firm Canyon Bridge and US chipmaker Lattice Semiconductor Corp, leading president Trump to block the proposal in September 2017.

Broadcom said on March 5 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. Broadcom is on track to win all six of the seats it's seeking, giving it a majority of the board to push ahead with its hostile $117 billion bid.

Singapore-based Broadcom has been working for weeks on a takeover of rival Qualcomm. The transaction falls under CFIUS's jurisdiction since Broadcom is now domiciled in Singapore, although it announced at the end of previous year it would return to the USA and plans to do so by May.

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