Tech's biggest takeover could be blocked by the USA government

Marie Harrington
March 8, 2018

U.S. Sen. John Cornyn of Texas, as well as San Diego Congressmen Scott Peters, D-San Diego, and Duncan Hunter, R-Alpine, sent letters to Trump Administration officials requesting a CFIUS review.

Advisers for Singapore-based Broadcom told a Qualcomm shareholder that the company is accelerating its plans to re-domicile to the US, The Post has learned.

To force a deal, Broadcom had been urging Qualcomm shareholders to elect a new board of directors at a meeting originally scheduled on Tuesday. The company also postponed its annual meeting from Sunday to April 5. However, many of Qualcomm's rivals, including Huawei Technologies Co Ltd, are Chinese. Broadcom is also looking to become a US company registered in business friendly DE, before the stockholder vote.

A visitor uses his mobile phone at the Huawei booth during the Mobile World Congress in Barcelona, Spain on February 28, 2017. If the takeover succeeds, Broadcom pledged to maintain the R&D resources Qualcomm devotes to 5G and innovation in future wireless standards and focus the R&D spend on "those critical technologies that are essential to the US".

In recent years, Huawei has forged closer commercial ties with big telecommunication operators across Asia, the Americas, and Europe.

Losing this key role in standards-setting could pose a threat to USA national security and also open up a place for China to fill with its own wireless companies, such as Huawei, CFIUS said.

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Such a move could hurt the U.S. effort to develop 5G wireless technology because of the small number of suppliers that build the hardware.

A CFIUS review in itself does not mean a deal will be halted. Still, the deal cant go on without an okay from CFIUS (and later other regulatory bodies will get involved too).

Broadcom has sought to acquire Qualcomm since November in what would be the largest tech merger in history at $117 billion, but the USA company rejected each offer.

Broadcom also underlined its roots in the United States, saying it is "in every important respect an American company", built from divestments and acquisitions from companies such as HP, AT&T and Brocade. Broadcom, a Singaporean semiconductor company, was planning to acquire Qualcomm by appointing six new board members at the meeting. Broadcom cried foul, saying this latest turn of events is an "engagement theatre", aimed at changing the will of Qualcomm stockholders. The uncertainty associated with such investigations, which are seen as politicized and offer little transparency, often dooms potential deals before a conclusion is reached. But Qualcomm said "Broadcom's claims that the CFIUS inquiry was a surprise to them has no basis in fact" and that Broadcom had been interacting with CFIUS "for weeks".

Broadcom, based in Singapore, has pledged to move its headquarters to the US, which it believes would remove CFIUS jurisdiction.

On that day, Broadcom Chief Executive Hock Tan stood in the White House and pledged to bring jobs to the USA - a move that won him praise from President Trump. The company points out that its CEO is an American, it's in the process of moving its headquarters to the U.S., and it and Qualcomm have institutional shareholders in common.

Other reports by TheSundaySentinel

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