Cotton Backs US Decision to Review Broadcom's Bid to Takeover Qualcomm

Alicia Cross
March 6, 2018

American national security bods at the Committee on Foreign Investment in the United States (CFIUS) have asked Qualcomm to delay tomorrow's vote on Broadcom's proposed $117bn (£84.7bn) takeover.

A US national security panel on Sunday ordered Qualcomm Inc (QCOM.O) to put off its March 6 annual shareholder meeting by a month, delaying a long awaited showdown in the company's attempt to fend off a takeover by Singapore-based Broadcom Ltd (AVGO.O).

Federal regulators have ordered San Diego-based Qualcomm to postpone a stockholders vote on whether to sell the company to rival chip maker Broadcom, due to national security concerns raised by several members of Congress. Qualcomm shot back that Broadcom's claims that the CFIUS inquiry was a surprise to them has "no basis in fact".

Analyst Stacy Rasgon at Bernstein Research doesn't see much likelihood that the CFIUS national security review would find grounds to block a merger.

The SEC has cleared Broadcom's preliminary proxy statement.

Broadcom is run by a Board of Directors and senior management team consisting nearly entirely of Americans.

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Qualcomm said Broadcom's response to the delay "is a continuation of its now familiar pattern of deliberately seeking to mislead shareholders and the general public by using rhetoric rather than substance to trivialize and ignore serious regulatory and national security issues". Broadcom had two meetings on February 14, 2018 and on February 23, 2018 with Qualcomm. The filing means there will be investigation into the objective of the Singapore-based Broadcom's motives behind the acquisition of the US-based Qualcomm. But over the past week there has been an increasing call for CFIUS to step in as well for security reasons.

CFIUS past year opposed the takeover of U.S. semiconductor manufacturer Lattice by a Chinese state group backed by a USA investment fund, and President Donald Trump then blocked the deal.

Gallagher also said a disruption of Qualcomm's research and development efforts "would in effect hand the growing competition for 5G to China".

Broadcom is now based in Singapore, but expects to move its headquarters to the later than May 6, the company said.

According to Bloomberg, executives over at Broadcom believe that Qualcomm voluntarily filed to have the CFIUS investigation launched, blasting it as a "blatant, desperate act".

In a February 26 letter to Treasury Secretary Steve Mnuchin, Rep. John Cornyn, R-Texas, the second-ranking Republican in the House of Representatives, asked Mnuchin to have CFIUS get involved given not only that a China-based company was trying to buy an American entity, but that it was doing so through a hostile takeover. Broadcom then reduced its offer for Qualcomm to $79 a share. On Monday, it extended its $127.50 per share tender offer until March 9.

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