Qualcomm takeover bid halted by United States government

Qualcomm takeover bid halted by United States government

Last month, US semiconductor testing company Xcerra Corp said CFIUS had blocked its $580 million sale to a Chinese state-backed semiconductor investment fund.

CFIUS believes this deal might hurt USA national security interests.

U.S. Republican lawmakers on Monday backed a U.S. panel's decision to delay semiconductor firm Qualcomm Inc (QCOM.O) shareholder meeting to allow for a more extensive review of Broadcom Ltd's (AVGO.O) takeover bid.

Broadcom's hostile takeover attempt of Qualcomm could pose a national security risk because of Qualcomm's leadership in developing critical semiconductor technology, according to the United States treasury department, setting up a potentially insurmountable hurdle to getting a deal done. But some other news has come out that might force Broadcom to put the kibosh on its bid for now, and try again at another time. The delayed meeting and CFIUS investigation are the latest roadblocks the Singapore-based Broadcom has faced in its attempts to acquire Qualcomm.

The US government, including the Department of Defense, also source sensitive technologies from Qualcomm.

In a Monday statement, Broadcom said Qualcomm had "secretly" asked the CFIUS to investigate back at the end of January. The company said it recognizes "the important role CFIUS plays in protecting our national security, and is fully committed to cooperating with CFIUS in any review".

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.

Broadcom, to get around a CFIUS review, had promised earlier to become a United States company by mid-May. "Broadcom's dismissive rhetoric notwithstanding, this is a very serious matter for both Qualcomm and Broadcom", Qualcomm said in a statement.

The risks of the potential deal "warrant a full investigation".

One of the CFIUS's main concerns is that a Broadcom takeover could kill long-term R&D at Qualcomm, as the company would instead refocus on generating short-term profits.

In contrast to the casual geopolitical xenophobia of the "we don't want our companies acquired by dodgy foreigners" argument, the fear asset stripping on an unprecedented scale would appear to have a bit more substance.

CFIUS can approve or propose changes to deals, but only the president can block a transaction on national security grounds. The company is now based in Singapore, but said in November that it will move its legal headquarters back to the United States.

The semiconductor industry is locked in a race to develop chips that power so-called 5G wireless technology.