President Donald Trump issued an executive order Monday blocking Broadcom Ltd from pursuing its hostile takeover of Qualcomm Inc, scuttling a $117 billion deal that had been scrutinized by a secretive panel over the tie-up's threat to USA national security.
In a letter on March 5, CFIUS wrote to Broadcom's lawyers saying that on March 4, it had issued an interim order prohibiting Broadcom from taking control of Qualcomm by electing a majority of the company's directors, as it proposed to do in a filing with the U.S. Securities and Exchange Commission on February 20. Subsequently, Broadcom last month attempted to launch a hostile takeover of Qualcomm by electing a majority of the company's directors.
Yesterday in a surprise move President Trump blocked Broadcom's proposed takeover of Qualcomm.
Trump made a decision to squelch Broadcom's bid on the recommendation of the Committee on Foreign Investment in the United States, which reviews foreign purchases of US entities.
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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.
In an attempt to ease those worries, Broadcom last week pledged to make the USA 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.
Access to the wireless technology and control over them is "viewed as a national security threat in a way that steel once could, in the last century", Forbes contributor Ken Roberts said.
Broadcom said it "strongly disagrees" a tie-up could raise national security concerns and had pledged to invest to ensure United States leadership in 5G, the superfast networks crucial to robotics, connected cars, and other smart devices.
Qualcomm and Broadcom did not immediately respond to requests for comment Monday night.
Broadcom said it would fully cooperate with CFIUS screening, but the letter implied it would be hard to persuade the committee to approve the takeover.
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"The risk is that this standard could be broad enough to include practically anything, and this is happening at the same time as President Trump is also trying to impose tariffs and trade restrictions", said Greengart. It said: "given well-known USA 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".
A few hours ago US President Donald Trump stepped in to kill off any deal between Broadcom and Qualcomm.
Trump's order came as Broadcom was in the midst of moving its headquarters from Singapore to the US Broadcom had announced the move in November after Tan met with Trump at the White House.
Broadcom had sought to provide assurances it would continue investing in research after the takeover, but in a letter on Sunday sent to both companies CFIUS said Broadcom's actions had "so far" confirmed its national security concerns.
The inter-agency body claimed that a decrease in R&D would specifically hit 5G, a field led by Qualcomm and Huawei. Right now, Qualcomm has said it expects 5G to become a significant source of income next year (its fiscal year 2020 that ends in September) as more trials ramp up and deployment expands.
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