POTUS Halts Qualcomm's Acquisition By Broadcom

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Then overnight, Mr Trump cited national security in choosing to block Singapore-based chipmaker Broadcom's $117bn takeover bid for U.S. rival Qualcomm, even though a deal had yet to be reached.

U.S. President Donald Trump on Monday blocked microchip maker Broadcom Ltd's(AVGO.O) proposed takeover of Qualcomm Inc(QCOM.O) on national security grounds, ending what would have been the technology industry's biggest deal ever amid concerns that it would give China the upper hand in mobile communications.

The Committee on Foreign Investment in the United States (CFIUS), which raised concerns about the Qualcomm deal with Trump, listed the highly leveraged nature of Broadcom's bid for its larger rival as a major concern coupled with the risk of the USA losing mobile technology leadership.

"The proposed takeover of Qualcomm by the Purchaser is prohibited, and any substantially equivalent merger, acquisition, or takeover, whether effected directly or indirectly, is also prohibited", Trump said. Qualcomm had argued Broadcom's offer undervalued it.

The U.S. feared that Broadcom would curtail investment in research and development, undermining Qualcomm's position in developing 5G and creating an opportunity for China's Huawei Technologies Co. Qualcomm didn't respond to requests for comment.

The national security order can't be appealed.

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The earlier redomiciliation also appears aimed at blunting concerns raised by the U.S. Treasury Department's Committee on Foreign Investment in the U.S. (CFIUS). That theoretically gives Chinese companies such as Huawei and closest rival ZTE Corp. the upper hand in steering the direction of wireless communications development, thereby - so the argument goes - jeopardizing USA national security. Another concern, from a broader industry perspective, is that a united Broadcom Qualcomm entity could control approx 65 per cent of the bill-of-materials that goes into smartphone handsets. In fact, reports last week said Intel was waiting to see the Broadcom deal fall through so that it could move forward with its own acquisition plans. Furthermore, the document states that Qualcomm must hold its annual shareholders' meeting in the next ten days.

Intel's Broadcom deal alone would be worth $170 billion, according to Barron's, and that's without the successful Broadcom acquisition of Qualcomm. If that happened, China's Huawei Technologies, a rival to Qualcomm and a major producer of mobile chips, might become much more dominant around the world.

Trump's order came as Broadcom was in the midst of moving its headquarters from Singapore to the U.S. Broadcom announced the move in November after its Chief Executive Office Hock Tan met with Trump at the White House. President Trump's Treasury Secretary simultaneously tried to downplay the decision, saying that it was not a reflection on Broadcom at large, nor its "thousands of hard working and highly skilled United States employees".

This particular intervention by the President may be unprecedented but follows previous action taken by the White House to limit what it claims are potential national security risks from foreign businesses.

However, while acknowledging that national security concerns about the deal were "defensible", the San Diego Union-Tribune in an editorial today questioned whether other motivations also played into the decision.