US Blocks Broadcom Takeover of Qualcomm

US Blocks Broadcom Takeover of Qualcomm

US Blocks Broadcom Takeover of Qualcomm

President Donald Trump blocked Singapore chipmaker Broadcom from pursuing a hostile takeover of USA rival Qualcomm, ruling the proposed combination would imperil national security. The deal would make Broadcom the third-biggest maker of microchips, behind only Intel and Samsung. That followed another CFIUS letter last week, again to both companies, which questioned what a deal might mean for Qualcomm's position in the development of 5G technology. Whether Intel lobbied in favor of blocking the Qualcomm-Broadcom deal or not, it can join Qualcomm in celebrating its failure.

Now President Trump Blocks Broadcom Takeover Bid for Qualcomm on Security Grounds. To be slightly more accurate, there's been a courtship of Warner Bros. proportions between the two firms, if the part of Qualcomm were played by Penelope Pussycat and the part of Broadcom by Pepé Le Pew. "The proposed takeover of Qualcomm by the Purchaser is prohibited, and any substantially equivalent merger, acquisition, or takeover, whether effected directly or indirectly, is also prohibited". Broadcom is known for cutting R&D to boost short-term profits. Mario Morales at IDC told the BBC that every major country around the world is in a race to deliver 5G technology. "Semiconductor technology and companies like Qualcomm will be an important weapon in that 5G arms race [and] the USA like other nations and regions want to be first".

Broadcom was working to move its headquarters to the US, making itself an American company for legal purposes. It was hard to find a single person who thought the Broadcom deal should have gone through, outside of Broadcom itself, and allegedly for increased national security, the deal simply couldn't have happened.

The order is in response to Singapore-based Broadcom's proposal to acquire San Diego-based Qualcomm for $121bn, a move that Qualcomm's board of directors unanimously rejected last month. "Broadcom strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns". Plus, Qualcomm still hasn't closed its purchase of NXP Semiconductors (NXPI), which needs to get approval from regulators in China.

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The letter continued, explaining that, "given well-known US national security concerns about Huawei and other Chinese telecommunications companies, a shift to Chinese dominance in 5G would have substantial negative national security consequences for the United States".

With Broadcom's USA move scheduled to take place by April 3, the next few weeks stand to be interesting ones for Qualcomm and Broadcom investors. For one thing, it is only going to become harder for foreign tech companies - not just Chinese - to acquire U.S. technology businesses as the White House appears receptive to any argument around the diminution of American corporate might.

This is not the first time Donald Trump has intervened in the acquisition of a USA company by a foreign entity. Even Barack Obama blocked a technology acquisition by a Chinese investment fund citing similar concerns, notes the BBC.

Broadcom CEO Hock Tan had seized on Qualcomm's legal headaches in his attempt to persuade the US government to keep the deal alive.

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