Trump Blocks Broadcom's Qualcomm Takeover

14 March, 2018, 00:38 | Author: Shannon Aguilar
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Broadcom said in a statement: "Broadcom strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns".

It was also unlikely to pass muster in Washington because the Committee on Foreign Investment in the United States (CFIUS), a panel formed from various USA government agencies that effectively acts as an arbiter of various takeover deals, had already warned the takeover could act against U.S. national security.

Overnight, Trump signed the blocking order which also bans the Broadcom candidates for the new Qualcomm's director's board seats so the acquisition wouldn't be authorised by them since it was rejected twice by Qualcomm directors before.

With his swift rejection of Broadcom Ltd.'s hostile takeover of Qualcomm Inc., President Donald Trump sent a clear signal to overseas investors: Any deal that could give China an edge in critical technology will be swatted down in the name of national security. "Under the terms of the Presidential Order, all of Broadcom's director nominees are also disqualified from standing for election as directors of Qualcomm".

Lewis said it was possible U.S. intelligence found something to warrant concern over the deal even as Broadcom was taking steps to redomicile in the United States by April 3, which would negate a CFIUS investigation.

The Trump administration's move also reflects concerns that losing Qualcomm would allow its rival, China's Huawei Technologies, to dominate the market and leave the US unable to help set mobile telephony standards going forward, thus jeopardizing national security, an unnamed White House official told Reuters.

For the second time in barely a fortnight, Donald Trump has cited "national security" to justify a significant decision affecting business.

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Trump has now blocked a total of nine takeover attempts by foreign companies, mostly from China, according to data compiled by Bloomberg. 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 United States national security. While Qualcomm shot back that its suitor wanted to mislead shareholders by moving their attention away from "serious regulatory and national security issues" in the deal.

"We believe Broadcom's options start with a continuation of broadly-scoped communications-focused M&A", B Riley analyst Craig Ellis said.

Trump ordered Broadcom and Qualcomm to "immediately and permanently abandon the proposed takeover". China doesn't allow USA companies into key markets, citing its own national security.

Another fear of the United States government is that Broadcom would not push ahead with Qualcomm's 5G R&D plans, leaving China's Huawei technologies to dominate communications tech and equipment used in the world's next-gen tech devices. Qualcomm's shareholder meeting, which must now take place no later than ten days after this order, is scheduled for March 23. 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.

Trump hosted Broadcom's Tan in the White House previous year when the executive announced the proposed move.

CFIUS cited Broadcom's thrifty approach to R&D and argued that the Singapore-based company would likely cut costs at Qualcomm, which would in turn weaken its ability to compete against Chinese telecoms rivals such as Huawei.

"In the absence of information that changes CFIUS's assessment of the national security risks posed by this transaction, CFIUS would consider taking further action, including but not limited to referring the transaction to the president for decision", Treasury said in the letter, which Qualcomm made public earlier Monday.


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