Donald Trump blocks Broadcom's USD 117 billion bid to buy Qualcomm

Darnell Taylor
March 13, 2018

The President of United States, Donald Trump on Monday blocked the microchip manufacturer, Broadcom Ltd's takeover of Qualcomm on national security concern, putting an end what could've been the tech industry's biggest deal ever.

The presidential order to block Singapore-based Broadcom's $117 billion bid for San Diego-based Qualcomm reflected concerns about the United States' ability to set the technology standards for the next generation of mobile cell phones in the competition with Chinese companies.

The president acted on a recommendation by the Committee on Foreign Investment in the US, which reviews acquisitions of American firms by foreign investors.

Although Broadcom is incorporated and based in Singapore, CEO Hock Tan announced late previous year while visiting Trump at the White House that the company would return its corporate headquarters to the United States, likely using San Jose as a base.

Announcing the extraordinary move, Trump said "there is credible evidence" that allowing the Singapore-based company to take control of Qualcomm could lead to "action that threatens to impair the national security of the United States".

Broadcom has repeatedly fouled up the politics on this deal and issued clumsy, vague rebuttals to the CFIUS review. Barton Investment Management who had been investing in Qualcomm for a number of months, seems to be less bullish one the $93.31B market cap company. Pentagon officials insisted on a review of Broadcom's proxy battle, while the USA treasury department had pushed back, according to people familiar with the matter. "The Purchaser and Qualcomm shall immediately and permanently abandon the proposed takeover", it read in part.

He also noted that Department of Defense programs rely on access to Qualcomm products.

More notable recent QUALCOMM Incorporated (NASDAQ:QCOM) news were published by: Fool.com which released: "Better Buy: Intel Corporation vs. Qualcomm Inc." on March 07, 2018, also Reuters.com with their article: "Broadcom promises on security, Qualcomm revamps board" published on March 09, 2018, Seekingalpha.com published: "Podcast: Qualcomm-Broadcom, Gaming Industry Meets Trump, Machine Learning Software" on March 11, 2018. It expects to complete the investigation shortly and requested Broadcom provide any additional information as soon as possible.

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Broadcom breached the order and took steps to hurry the move to the U.S. without notifying the government, a senior official said in a Sunday letter from the U.S. Department of the Treasury, which manages the CFIUS process.

Qualcomm rejected Broadcom's $79 per share offer as too low, given its growth prospects from the expansion of cellular technology into other gadgets beyond smartphones and upcoming, ultra-fast 5G networks.

While Qualcomm is the world's fourth-largest chip maker, it still found itself being stalked by the smaller, but aggressively growing Broadcom after an unsolicited bid was lobbed last November. The company has relied on cost cuts from acquisitions to propel its profit higher and most likely would have needed to cut deeply at Qualcomm to maintain its investment-grade credit rating at the latest proposed $79-a-share bid.

The American government's increased scrutiny of foreign transactions generally has made it more hard for Chinese companies to buy USA assets, analysts have said.

"Qualcomm has become well-known to, and trusted by, the US government", said Deputy Assistant Secretary for Investment Security Aimen Mir.

Previously, Broadcom is making moves to become a United States company.

In the coming days or weeks after Broadcom's legal counsel has reviewed their options, we're bound to hear a more extensive response, so stay tuned.

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