In the second such move since taking charge of the Oval Office, US President Donald Trump signed an executive order yesterday, March 12, blocking a $140 billion bid by the US- and Singapore-based semiconductor company Broadcom to take over US-based chips manufacturer Qualcomm.
Qualcomm had earlier rebuffed Broadcom's $117 billion bid, which was under investigation by the U.S. Committee on Foreign Investment in the United States (CFIUS), a multi-agency panel led by the Treasury Department that reviews the national security implications of acquisitions of U.S. corporations by foreign companies. The order came a week after the Committee on Foreign Investment in the USA, or CFIUS, expressed concern that the takeover of Qualcomm by Singapore-based Broadcom could leave the USA behind when it comes to mobile technology.
Yesterday in a surprise move President Trump blocked Broadcom's proposed takeover of Qualcomm.
Qualcomm's executive board secretly approached the CFIUS to review the takeover deal in order to block the deal and protect the company from an acquisition, Broadcom said at the time, and later corroborated by sources speaking to TechCrunch.
The Committee on Foreign Investment in the United States (CFIUS), which regulates foreign investment, said that it was investigating "the risks associated with Broadcom's relationships with third party foreign entities", and the "national security effects of Broadcom's business intentions with respect to Qualcomm".
Broadcom had worked hard to complete its proposed deal to acquire Qualcomm, which has cited multiple concerns including possible antitrust issues and the offered price.
The proposal, according to Qualcomm's board of directors, didn't ascribe any value to Qualcomm's NXP acquisition in 2016, or the expected resolution of licensing disputes and the greater opportunity in the 5G market.
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"This decision is based on the facts and national security sensitivities related to this particular transaction only and is not meant to make any other statement about Broadcom or its employees, including its thousands of hard working and highly skilled U.S. employees", U.S. Treasury Secretary Steve Mnuchin said in a statement.
This presidential order follows a letter from the Committee on Foreign Investment in the United States warning against the takeover. The merger would have put one of America's largest mobile chipmakers in the hands of a company based in Asia, a region that has been racing against American companies to develop the next generation of mobile technology. While the United States remains dominant in the standards-setting space now, China would likely compete robustly to fill any void left by Qualcomm as a result of this hostile takeover. Underscoring the risks it saw in the deal, CFIUS intervened in the middle of a proxy fight rather than waiting for a formal purchase agreement. Furthermore, the document states that Qualcomm must hold its annual shareholders' meeting in the next ten days. Bloomberg reports that "Any deal that could give China an edge in critical technology will be swatted down in the name of national security".
In spite of the fact that Broadcom is based in Singapore, Trump is likely to have had another Asian country in mind when passing his presidential order: China.
"The Purchaser and Qualcomm shall immediately and permanently abandon the proposed takeover", reads the presidential order.
Trump hosted Broadcom's Tan in the White House a year ago when the executive announced the proposed move. This could boring Qualcomm's competitive edge in 5G technology over Chinese rivals such as Huawei Technologies, and damage its ability to supply products to the U.S. Department of Defense.