In an unexpected turn of events, the American president Donald Trump blocks the takeover of chipmaker Qualcomm by Broadcom, for reasons of national security. The decision was unveiled just hours after Hock Tan, the chief executive officer of Singapore-based Broadcom, met with officials at the Pentagon in a last-ditch effort to salvage what would have been the biggest technology deal in history. CFIUS listed several issues, including Broadcom's reputation for cutting research spending and potential national security risks. Broadcom didn't have an agreement to buy San Diego-based Qualcomm.
"Broadcom, which is in all important respects a US company, has been repeatedly approved by CFIUS in its previous acquisitions of USA companies", the company said in its statement, "and has always engaged productively with CFIUS to ensure USA national security is protected".
Broadcom's Singapore connections complicated matters, raising fears about a prominent US chipmaker being owned by a foreign company.
CFIUS disclosed that it was looking at "the risks associated with Broadcom's relationships with third party foreign entities", as well as the "national security effects of Broadcom's business intentions with respect to Qualcomm", according to the memo, which was written by a Treasury Department official. While Trump's order bars Broadcom's nominees from remaining on the slate, Qualcomm can't ignore the signal investors sent when the voting was open to alternatives.
Broadcom's dream of dominating the mobile chip business by taking over Qualcomm is apparently dead. It also has classified contracts with the Department of Defense, according to the Treasury Department.
While Qualcomm is the world's fourth-largest chip maker, it still found itself being stalked by the smaller, but aggressively growing Broadcom after an unsolicited bid was lobbed last November. The order also said Broadcom's proposed new slate of candidates for Qualcomm's board can not stand for election. "In short, US national security concerns are not a risk to closing, as Broadcom never plans to acquire Qualcomm before it completes redomiciliation". While Qualcomm isn't likely to complain much given that it repeatedly rejected Broadcom's bids as undervalued, Broadcom now faces the prospect of having to either look at another acquisition target or accept that it will have to tackle 5G by itself. In September 2017, he blocked Chinese firm Canyon Bridge Fund from acquiring Lattice Semiconductor Corporation (which is based on Oregon), citing national security concerns.
"Qualcomm has become well-known to, and trusted by, the US government", the Treasury Department said in a March 6 letter. Shares of Broadcom rose less than 1 percent.
Only a few days ago, Broadcom's buyout bid was of such high concern to lawmakers that they asked federal regulators to review the proposed $117 billion deal-and unusual move considering the two companies haven't come to terms on a buyout deal. Hollencrest Securities Ltd has 0.03% invested in QUALCOMM Incorporated (NASDAQ:QCOM) for 4,360 shares.