US President signs order blocking Broadcom from buying Qualcomm

Broadcom Qualcomm merger a threat to 'national security', says Trump

Citing national security concerns voiced by the U.S. Department of the Treasury's Committee on Foreign Investment in the United States (CFIUS), the White House yesterday prohibited any takeover, acquisition, or merger bid for Qualcomm by Broadcom. Broadcom played its own game of carrot and stick, with an improved share price offer, but also offered its own proposed board of directors slate to shareholders in a move meant to launch a hostile takeover.

Yesterday in a surprise move President Trump blocked Broadcom's proposed takeover of Qualcomm.

Broadcom moved to buy Qualcomm in November 2017, roughly a year after Qualcomm announced a deal to buy NXP Semiconductors NV (NASDAQ:NXPI), a Dutch company working on chips for self-driving cars. The San Diego, California-based company, the world's largest maker of chips for phones (if you own a high-end Android phone, it's likely using a Qualcomm processor), owns a number of the technologies that served as the foundation for 3G and 4G technology, and it's been pouring R&D dollars into 5G.

CFIUS told lawyers from both companies Broadcom had repeatedly violated one of its orders in its pursuit of Qualcomm and its investigation had confirmed the national-security risks, the Wall Street Journal reported.

(AVGO) are trading up 2.6% Tuesday morning at $269.12 following President Donald Trump's move to block its $117 billion hostile takeover bid for rival Qualcomm Inc.

While Huawei wasn't a part of the deal and didn't try to make a run at Qualcomm or Broadcom, there's growing concern in the USA that China is gaining too much control over the mobile Internet infrastructure and other components that the increasingly relying upon.

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While Trump didn't share any of the "credible evidence" he says he saw, he gave the U.S. Attorney General full power to enforce his order and ensure Broadcom backs away. Bloomberg argues that Trump was concerned that a Broadcom takeover of Qualcomm would have allowed the Singapore-based company to weaken Qualcomm and therefore strengthen Huawei. President Trump's Treasury Secretary simultaneously tried to downplay the decision, saying that it was not a reflection on Broadcom at large, nor its "thousands of hard working and highly skilled USA employees". Qualcomm didn't respond to requests for comment.

Last month, USA semiconductor maker Xcerra said that the government had blocked its sale to a Chinese state-backed semiconductor investment fund.

In response to Trump's decision, Broadcom has said it is reviewing the case and "strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns".

"The CFIUS process focuses exclusively on identifying and addressing national security concerns".

Broadcom is a market leader in chips that control Bluetooth connections. Yesterday morning, Broadcom said it was speeding up its planned redomiciliation from Singapore to the USA from May 6 to April 3 in expectation of the planned takeover. The company must stop the acquisition together with Broadcom and provide written proof of this once the step has been taken. The deal would have created a major competitor for the chipmaker. Broadcom also promised not to sell off any "critical national security assets" to foreign firms.

While a Qualcomm deal would have made Broadcom the dominant supplier of chips used in smartphones and brought the company to the forefront of developing technology for the next generation of mobile network technology (5G), it can still make a string of smaller deals to build heft. "Better to keep it in American hands and protect American national security", Cotton said.

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