US Security Panel Deals Major Blow to Broadcom's Bid for Qualcomm

The Qualcomm inquiry comes as lawmakers in Washington are considering a bill that would toughen national security reviews of overseas deals by broadening CFIUS’s authority

Qualcomm takeover bid halted by US government

The Committee on Foreign Investment in the United States, or CFIUS, said it is troubled about Broadcom's relationships with foreign entities, the New York Times reported Tuesday.

A view of the US Treasury building, seen in Washington, DC on June 21, 2017. The unclassified aspects that the letter detailed included concerns that the US could lose standing in 5G cellular technology and standards and a supply of trusted semiconductors to classified Department of Defense programs.

Broadcom's take: It says national security concerns are overblown.

"Qualcomm has become well-known to, and trusted by, the USA government", the Treasury Department wrote to lawyers involved in the deal on Monday.

Such a move could hurt the USA effort to develop 5G wireless technology because of the small number of suppliers that build the hardware.

Qualcomm agreed to postpone its annual shareholder meeting this week in order for the panel to investigate the takeover bid.

San Diego-based Qualcomm has emerged as one of the biggest competitors to Chinese companies, such as Huawei Technologies, vying for market share in the sector.

A CFIUS review in itself does not mean a deal will be halted. President Trump a year ago blocked a Chinese-backed takeover of Lattice Semiconductor Corp. because of the importance of semiconductors to the USA government and China's role in the proposed acquisition.

Cornyn said on Monday he was glad CFIUS had made a decision to review the deal, noting aggression by "international rivals, like China".

The Department of Treasury broadened the scope of the inquiry to look at Broadcom's hostile takeover bid as well. Investors were scheduled to vote Tuesday on six Broadcom nominees, potentially giving it a majority of Qualcomm's board.

Broadcom has struggled to complete its proposed deal to buy Qualcomm as the latter has resisted, citing concerns including the price offered and potential antitrust hurdles.

Once Broadcom re-domiciles-currently planned for no later than 6 May-the takeover would not be a CFIUS covered transaction, Broadcom said in the statement. Talks grew more contentious a few weeks later when Broadcom lowered its buyout offer for Qualcomm to approximately $117 billion, making "an inadequate offer even worse".

With CFIUS examining the deal, Qualcomm now can work to close its pending $43 billion of NXP Semiconductors to diversify its business beyond smartphones, attempt to make progress on patent licensing disputes with Apple and try to construct a stronger case to shareholders to remain a stand-alone company, said Rasgon.

Broadcom, based in Singapore, has pledged to move its headquarters to the USA, which it believes would remove CFIUS jurisdiction. Broadcom just has to wait, move back to the USA, and that will be one obstacle it does not have to worry about.

Broadcom said it is run by a board of directors and senior management team consisting nearly entirely of Americans.

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