Published: Sat, March 17, 2018
Markets | By Noel Gibbs

Broadcom drops Qualcomm acquisition bid after Trump block

Broadcom drops Qualcomm acquisition bid after Trump block

President Donald Trump on Monday issued an executive order effectively blocking Broadcom Ltd.'s $117 billion takeover bid for California-based Qualcomm Inc., citing national security grounds.

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.

"In both the definitive merger agreement that Broadcom provided to Qualcomm and in the revised version that Qualcomm sent back to Broadcom on February 26, 2018, one of the closing conditions was that Broadcom redomicile to the US, and notably, in neither party's draft was the closing of the proposed acquisition conditioned on CFIUS clearance", the company said in a statement.

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Qualcomm's chip technology is critical to the development of US smartphone communications infrastructure and other digital devices. At one point, the company also offered to raise its offer for Qualcomm, and when CFIUS first raised concerns about the deal, Broadcom sent a letter to lawmakers promising it would not slow research and development in 5G networking technology if the merger were approved.

Trump's decision in this regard comes after Broadcom said last Friday that it will ask its shareholders to approve its plan to redomicile to the US.

"Although we are disappointed with this outcome, Broadcom will comply with the Order", the Asian company said Wednesday.

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While Broadcom pursues Qualcomm and Intel waits, Qualcomm has also put a cash offer on the table to acquire another chipmaker, Netherlands-based NXP Semiconductors.

In an attempt to ease those worries, Broadcom last week pledged to make the US a leader in the race to build 5G networks, saying it would create a $1.5 billion fund to support the effort if took control of Qualcomm. "Trump's decision" could further rattle the global economy and worldwide norms" if other countries choose to block USA investment as a retaliatory measure. He blocked the deal just hours after speaking with Hock Tan, Broadcom's CEO at the Pentagon, who was trying to save the deal. The "national security" defense used to deflect the hostile takeover may turn out to be a double-edged sword.

Broadcom also tried to curry favor by moving its legal headquarters from Singapore to the U.S within the next few weeks.

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"Such a company, if subjected to national or terrorist interests adverse to America, could install lockout features to block our security agencies from monitoring mobile data".

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