President Trump issued an order prohibiting Broadcom's attempt to take over San Diego-based Qualcomm, CNBC and Bloomberg reported Monday. At least a half-dozen technology deals have collapsed during the Trump administration in the face of concerns raised by CFIUS.
Earlier today it was revealed USA national security officials were threatening to recommend Trump block Broadcom Ltd.'s proposed takeover of the rival chipmaker, according to a Treasury Department letter made public Monday.
CFIUS is a multiagency panel of the USA government that has become more active during the Trump administration.
With Broadcom offering more than $120 billion to purchase Qualcomm, there is little doubt Qualcomm would have felt a massive squeeze after the purchase as Broadcom worked to recoup their investment.
While initially founded in the U.S., Broadcom reincorporated in Singapore in 2016 after it was sold to Avago.
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.
If Broadcom bought Qualcomm, CFIUS argued, it would likely cut costs at the American company and weaken its ability to compete against Chinese rivals like Huawei. CFIUS stepped in and through an interim order directed Qualcomm to postpone its board meeting, scheduled for March 6, for 30 days.
Broadcom said it was reviewing the presidential order."Broadcom strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns", it said in a statement in response to the decision.
Earlier this month, CFIUS confirmed it was investigating the deal and gave a very clear indication of its concerns. But it announced at a splashy White House event last November that it planned to move its headquarters to the U.S. At the time Donald Trump took credit for the planned move (and the jobs it might create).
For instance, the United States committee cleared Beijing-based Naura Microelectronics Equipment Co in January to buy USA semiconductor manufacturing equipment maker Akrion Systems LLC.
All 15 individuals listed as potential candidates on the Form of Blue Proxy Card filed by Broadcom and Broadcom Corporation with the Securities and Exchange Commission on February 20, 2018 (together, the Candidates), are hereby disqualified from standing for election as directors of Qualcomm. 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.
Qualcomm rejected Broadcom's $79 per share offer as too low, given its growth prospects from the expansion of cellular technology into other gadgets beyond smartphones and upcoming, ultra-fast 5G networks. Investec Asset Management Ltd holds 0.07% of its portfolio in QUALCOMM Incorporated (NASDAQ:QCOM) for 328,266 shares.
Qualcomm also has raised the specter of a long, hard regulatory review by global competition agencies, which could weaken the company just as 5G networks are rolling out. It also has classified contracts with the Department of Defense, according to the Treasury Department. Qualcomm said it would challenge that fine.
Shares of Broadcom rose more than 3.5 percent on Monday while Qualcomm's stock edged lower.