USA regulators ordered a delay in Qualcomm's annual shareholder meeting, which was scheduled Tuesday, so they can review a proposed $117 billion hostile takeover bid by Broadcom for national security concerns.
Yesterday, the Committee on Foreign Investment in the United States (CFIUS) asked Qualcomm to delay its annual shareholder meeting, originally scheduled for tomorrow, so it can investigate the possibility that the takeover from Singapore-based Broadcom Limited (the umbrella organization that controls Broadcom) poses a threat to national security.
Qualcomm and Broadcom were not immediately available for comment. Qualcomm shot back that Broadcom's claims that the CFIUS inquiry was a surprise to them has "no basis in fact".
Broadcom said it is run by a board of directors and senior management team consisting nearly entirely of Americans. It characterized Broadcom's release as "a continuation of its now familiar pattern of deliberately seeking to mislead shareholders and the general public".
In addition, Qualcomm claims that the investigation is no surprise to Broadcom, which has been in communication with the United States agency "for weeks" and has made two written submissions to CFIUS itself. A combined Broadcom-Qualcomm would create the world's third-largest chip maker, behind Samsung and Intel.
Broadcom is incorporated and now based in Singapore, but CEO Hock Tan announced late previous year while visiting President Donald Trump at the White House that the company would return its corporate headquarters to the US, likely using San Jose as a base. But over the past week there has been an increasing call for CFIUS to step in as well for security reasons.
Reuters reported last week that CFIUS had begun looking at Broadcom's bid amid growing pressure from lawmakers, including President Donald Trump's fellow Republicans in Congress. "A disruption of Qualcomm's R & D efforts would in effect hand the growing competition for 5G to China".
"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. Whether that contact would have led the CFIUS to tip off an impending investigation of the deal to Broadcom is another question. However, in recent weeks, Qualcomm has become more receptive to Broadcom's proposal - that is if the company can sweeten its offer price and pass regulatory oversight.
Qualcomm has gotten what appears to be a unique ruling from the USA government to help it fight off a now foreign acquirer.
"Broadcom continues to pursue the redomiciliation process as expeditiously as possible", Broadcom said."Upon completion of the redomiciliation, Broadcom's proposed acquisition of Qualcomm will not be a CFIUS covered transaction". On Monday, it extended its $127.50 per share tender offer until March 9.