Massive Qualcomm takeover is on hold after U.S. government intervention

Massive Qualcomm takeover is on hold after U.S. government intervention

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In a statement to shareholders dated last Thursday, Qualcomm reiterated its opposition to Broadcom's $79 per share offer and urged shareholders to vote to re-elect all 11 existing Qualcomm directors.

Federal regulators have ordered San Diego-based Qualcomm to postpone a stockholders vote on whether to sell the company to rival chip maker Broadcom, due to national security concerns raised by several members of Congress.

In a statement March 5, Broadcom officials accused their Qualcomm counterparts of using CFIUS to slow down Broadcom's acquisition efforts by "secretly [filing] a voluntary request with CFIUS to initiate an investigation, resulting in a delay of Qualcomm's Annual Meeting 48 hours before it was to take place".

During a public ceremony at the White House Nov. 2, Broadcom CEO Hock Tan announced to President Donald Trump and others that he would be moving his company to the U.S. That announcement came as CFIUS was reviewing another merger proposal, Broadcom's bid to purchase Brocade Communications Systems. Broadcom began a hostile bid for Qualcomm late previous year, and has largely been rebuffed for its advances.

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Broadcom, whose six nominees for Qualcomm's board are up for a vote at the meeting, said on Monday Qualcomm had not disclosed any approach to CFIUS in meetings between the two sides over the past month. Qualcomm has so far resisted the unsolicited bid as too low and fraught with regulatory challenges.

Broadcom's proposed purchase of Qualcomm is valued at about $117 billion.

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. Qualcomm shot back that Broadcom's claims that the CFIUS inquiry was a surprise to them has "no basis in fact". The interagency body, which is known as Cfius, includes representatives from the Treasury and Justice Departments. A combined Broadcom-Qualcomm would create the world's third-largest chip maker, behind Samsung and Intel. Qualcomm said it would challenge that fine. Although Qualcomm recently signaled the companies were closing in on a deal, the companies have disagreed on a price, prompting an attempted hostile takeover.

"It is my view that failure by CFIUS to review this hostile takeover would potentially encourage other foreign parties to evade CFIUS review by taking control of the boards of sensitive USA businesses through proxy fights", Texas Republican Sen.

  • Kyle Warner