Trump signs order blocking Broadcom's $117 billion bid for Qualcomm

Reuters

Citing national security concerns with the Singapore-based Broadcom acquiring the US-based Qualcomm, President Trump issued an order under the Defense Production Act of 1950 to prohibit the proposed acquisition or any similar transaction, effectively ending Broadcom's acquisition efforts.

In an unexpected turn of events, the American president Donald Trump blocks the takeover of chipmaker Qualcomm by Broadcom, for reasons of national security.

Announcing the extraordinary move, Trump said "there is credible evidence" that allowing the Singapore-based company to take control of Qualcomm could lead to "action that threatens to impair the national security of the United States".

Broadcom had been pursuing Qualcomm for about four months. Trump hosted Broadcom CEO Hock E. Tan in the White House previous year as he announced the move, and the company had hoped that would help it skirt the national security review.

Notably, in a press release today, Broadcom said it planned to redomicile to the U.S.by April 3, 2018.

In the letter, a Treasury official said CFIUS accelerated its investigation into the bid in light of Broadcom's violations of the panel's earlier order.

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In a letter to both companies' attorneys last week, the interagency panel said it was concerned that Broadcom's takeover would put at risk US efforts to build next-generation wireless networks, thereby giving Chinese firms the opportunity to take the lead.

Broadcom said its move to the U.S. meant national security concerns would have no longer been a problem for closing the deal. The order also disqualifies all 15 of Broadcom's proposed directors for Qualcomm. But the terms of the deal were shaky at best from the beginning, with Qualcomm rebuffing Broadcom every step of the way.

In a letter to the companies on March 5, CFIUS expressed concerns that Broadcom would not be willing to fund the research needed to maintain Qualcomm's strong position on so-called 5G technology, a forthcoming standard for wireless data networks, leaving the USA with nowhere but China to turn for such technology. But Broadcom CEO Hock Tan's real goal was apparently to smooth the road for its hoped-for acquisition of Qualcomm. Last September, he blocked the sale of Lattice Semiconductor Corp.to Canyon Bridge Capital Partners, which has ties to a fund owned by the Chinese government. While Intel is "eager for Broadcom to fail", it could make a play for the company if the merger gained momentum, the Journal said in another report on Friday.

CFIUS also would need to weigh that Qualcomm provides sensitive products to the US Defence Department, has a dominant role in US telecommunications infrastructure and performs significant research and development, Griner said. The move was widely perceived as an attempt to ease regulatory approval for the pending purchase of Brocade Communications Systems Inc., but Trump only had eyes for the mythical $20 billion of revenue Broadcom was supposed to bring to American towns and workers.

While Broadcom shares were holding steady in the wake of the announcement, investors were less enthusiastic about Qualcomm's chances, and shares dropped 4.5 per cent after hours.

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