Published: Wed, March 07, 2018
Economy | By

Qualcomm takeover bid halted by U.S. government

Qualcomm takeover bid halted by U.S. government

A USA national security panel's unusual decision to review Singapore-based Broadcom Ltd's $117 billion hostile bid for smartphone chipmaker Qualcomm Ltd illustrates an expanding focus on the competitiveness of the US semiconductor industry amid advances by China, regulatory experts said.

The letter, dated 5 March, was made public by Qualcomm on 6 March. Despite the unusual timing of the intervention, CFIUS chose to order a review of the proposed transaction and delayed the annual meeting.

Broadcom, to get around a CFIUS review, had promised earlier to become a USA company by mid-May.

Qualcomm said in a statement late on Monday that it was delaying its 2018 annual meeting to April 5 as a result of the CFIUS order.

The decision follows Qualcomm filing a request for a review by the regulator back in January.

"Given well-known US national security concerns about Huawei and other Chinese telecommunications companies, a shift to Chinese dominance in 5G would have substantial negative national security consequences for the United States".

That letter triggered "multiple phone calls, emails, and meetings" with CFIUS and representatives of the two companies.

"As a result of these communications ..."

The letter lays out a case that, in part, points to concerns about China as well as risks associated with "Broadcom's relationships with [unnamed] third-party foreign entities". Recall that CFIUS is an interagency committee that has the power to review foreign investments in the United States and determine whether or not such investments pose a risk to national security.

CFIUS will conduct an investigation, at least part of which will remain classified.

Sen. Tom CottonThomas (Tom) Bryant CottonGOP looks for Plan B after failure of immigration measures Senate rejects Trump immigration plan Our intelligence chiefs just want to tell the truth about national security MORE (R-Ark.), who has urged a crackdown on Huawei's forays into the USA market, praised the CFIUS intervention on Monday. Harm to Qualcomm's innovation would allow China to expand its influence in key wireless technology, the government said. The company has spent heavily on the next-generation telecommunications technology known as 5G, and the government said it owns 10 percent of the essential patents. The panel has recently blocked several deals by Chinese buyers, including Ant Financial's proposed takeover of MoneyGram, a money-transfer company.

The deal would load up $106 billion of debt, the largest corporate acquisition loan on record, the letter says.

Broadcom, a maker of chips for everything from cable modems to set-top boxes to digital video recorders, announced an unsolicited bid of $130 billion for Qualcomm in November.

In terms of products, "Qualcomm now holds active sole source classified prime contracts" with the Department of Defense, it said. Just what conclusion it will reach and whether President Trump will weigh in remains to be seen.

Like this: