In a rare intervention by the government, the Trump administration moved on Sunday night to stall the potential takeover of Qualcomm, the leading United States chipmaker, by Singapore-based Broadcom on national security grounds.
The Committee on Foreign Investment in the United States (Cfius), a panel made up of different USA government departments, asked Qualcomm to delay its annual meeting for 30 days so that it could "fully investigate" Broadcom's proposed deal.
"This was a blatant, desperate act by Qualcomm to entrench its incumbent board of directors and prevent its own stockholders from voting for Broadcom's independent director nominees", Broadcom said in a statement.
To view the full article, register now. "Broadcom's only correspondence with CFIUS was in response to CFIUS inquiries about Broadcom's nomination of directors to the Qualcomm board of directors, and such requests did not reveal that Qualcomm filed to initiate the CFIUS review on January 29, 2018".
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.
The crux of attention was then centered on Qualcomm's annual shareholders meeting where votes would be tallied for the board election. The order was placed to allow the subsidiary of the Treasury Department to investigate the acquisition maneuvers of Singapore-based Broadcom.
Broadcom said on Monday it is run by a board and senior management team consisting nearly entirely of Americans and is largely owned by the same USA institutional investors that own Qualcomm.
Singapore-based Broadcom has bid $117 billion for San Diego-based Qualcomm, which employs 13,000 people locally.
Moreover, Broadcom argued that it doesn't pose a national security threat to the United States. Broadcom shareholders are expected to vote on the move in early May. In the end, that approval came just weeks after Broadcom Chief Executive Officer Hock Tan announced in an Oval Office ceremony with Trump that Broadcom would bring its headquarters to the United States.
"It would be deeply concerning if foreign parties were able to acquire control of US companies through proxy fights for their boards without the action first going undergoing a CFIUS review", the congressman wrote, noting that such a move would encourage other foreign companies to also evade CFIUS overview through such means. Qualcomm on Monday extended its $44 billion tender offer for NXP to March 9, as it awaits clearance from China's MOFCOM, the only regulator globally required to approve the deal that has yet to do so.
Five other members of Congress signed the Gallagher letter on Friday that was sent to Treasury Secretary Steve Mnuchin.
U.S. Sen. John Cornyn, R-Texas, as well as San Diego-area U.S. Reps. The current USA government has shown itself to be exceedingly wary of foreign technology investment, as indicated by its recent shut-out of Chinese telecom infrastructure company Huawei.
"I support the idea that the committee on foreign investment takes a close look at that to see that American interests are protected", he added.
On Sunday, CFIUS instructed Qualcomm to delay by 30 days its annual shareholder meeting, which had been scheduled for Tuesday. On Monday, it extended its $127.50 per share tender offer until Friday.