United States security concerns delay Qualcomm vote on $142bn Broadcom sale

Leigh Mccormick
March 6, 2018

The Committee on Foreign Investment in the United States has ordered Qualcomm to delay a shareholder vote to elect a board of directors by 30 days.

In a statement, Broadcom disclosed that Qualcomm had voluntarily requested CFIUS intervention on January 29 and told none of its shareholders.

Singapore-based chipmaker Broadcom, which is seeking to buy rival Qualcomm, plans to complete its move back to the United States by mid-May, according to sources familiar with the matter.

Shareholders at Qualcomm's annual meeting were to vote whether to replace six of the California company's 11 board members with candidates backed by Broadcom, essentially endorsing the merger deal.

Broadcom slammed Qualcomm's decision to "secretly" file a voluntary request with CFIUS to start an investigation, labeling it a "blatant, desperate act" to entrench its incumbent board of directors.

Cornyn said Qualcomm is the leading USA company in driving 5G development, and an acquisition by Broadcom could stall that and hand the leadership of 5G R&D to Huawei, a Chinese tech firm.

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Qualcomm's board on Thursday sent a letter to shareholders urging them to re-elect its current members, making a statement against Broadcom's offer. "This brings Qualcomm's "engagement theater" to a new low". Qualcomm's leadership fiercely opposes the Broadcom offer, saying it "materially undervalues" the company, and analysts have said for months that even if shareholders approved it, it could be rejected on antitrust grounds.

Broadcom is incorporated and now based in Singapore, but CEO Hock Tan announced late past year while visiting President Donald Trump at the White House that the company would return its corporate headquarters to the US, likely using San Jose as a base.

The government committee, which reviews foreign acquisitions of US assets with an eye toward national-security interests, is led by the Treasury Department and includes officials from the departments of Justice, Defense, Homeland Security and Energy.

"Qualcomm's work is too important to our national security to let it fall into the hands of a foreign company - and in a hostile takeover no less", Cotton, a vocal Republican voice on foreign relations, said in a statement. Scott Peters, D-San Diego, and Duncan Hunter, R-Alpine, had called for a review of the deal, the San Diego Union-Tribune reported.

Qualcomm still is awaiting approval from regulators in China to acquire NXP. Qualcomm said it would challenge that fine. Upon completion of the redomiciliation, Broadcom's proposed acquisition of Qualcomm will not be a CFIUS covered transaction.

Qualcomm shares were down 1.2 percent to $63.95 at 12:36 p.m.in NY.

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