USA government halts Qualcomm-Broadcom action amid national security concerns

Broadcom return to US could be complete in May

Broadcom return to US could be complete in May

The annual meeting will be reconvened at 8:00am PST in San Diego, California, on April 5th.

The hostile takeover bid by Broadcom, the Singapore-based microchip designer, for Qualcomm, its American rival, turned ugly yesterday when the two companies accused each other of misleading shareholders after American regulators stepped in to delay the deal. The semiconductor industry is in a race to develop a faster SG wireless technology, and Qualcomm is one of the major competitors of China, says Reuters. If that move is ultimately successful, sympathetic ears to Broadcom would have a majority on Qualcomm's board and could clear a path to closing the deal.

The Committee on Foreign Investment in the United States (CFIUS), which has the power to stop deals that could harm national security, asked Qualcomm to postpone the annual meeting and election of directors by 30 days.

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As noted by The Wall Street Journal, the surprise move signals concerns among US government officials that a Broadcom acquisition of Qualcomm could raise national security issues and potentially affect the United States' role in the development of 5G network technology as China works to take a lead in the space.

Qualcomm reacted with its own statement, saying that Broadcom had already filed documents with CFIUS twice in the past several weeks and should not be surprised about the order.

"This can only be seen as an intentional lack of disclosure - both to Broadcom and to its own stockholders", the Singapore-based chipmaker said in a statement. "This brings Qualcomm's "engagement theater" to a new low".

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Qualcomm did not deny seeking a committee review but accused Broadcom of using misleading rhetoric "to trivialize and ignore serious regulatory and national security issues". This delay will push back the decision of Broadcom's (NASDAQ: AVGO) possible $117 billion takeover attempt of Qualcomm. "In compliance with the CFIUS order, Qualcomm will delay its annual meeting of stockholders and election of directors for at least 30 days so that CFIUS can fully investigate Broadcom Limited's proposal to acquire Qualcomm".

They were joined late Friday by five other members of Congress, led by Rep. Mike Gallagher, R-Wis. "The U.S.is now in a race with China in the development of 5G technologies, a race that will have profound impact on critical U.S. telecommunications infrastructure and on U.S. national security for years to come".

Prior to Gallagher's letter, Sen. Reuters reported last week that CFIUS had begun looking at Broadcom's bid as pressure grew from politicians, including senior Republican Senator John Cornyn.

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Buying Qualcomm would make Broadcom the third-largest chip maker, behind Intel Corp. and Samsung Electronics Co. CFIUS rules allow a company facing an unsolicited takeover bid to request a CFIUS review, so that its board of directors can better assess the regulatory risk of a deal.

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