Published: Wed, March 14, 2018
Finance | By Gustavo Carr

Trump's executive order blocks Broadcom's $140B acquisition bid for Qualcomm

Trump's executive order blocks Broadcom's $140B acquisition bid for Qualcomm

President Donald Trump blocked Singapore chipmaker Broadcom from pursuing a hostile takeover of US rival Qualcomm, ruling the proposed combination would imperil national security.

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.

The order said "there is credible proof that leads to believe that if Broadcom Limited, an anonymous society under Singapore law, holds control over Qualcomm Incorporated it could introduce measures that threaten to harm USA national security". As a part of its hostile takeover bid, Broadcom had nominated 6 people to Qualcomm's board.

An investigation into the deal by the Committee on Foreign Investment in the United States (CFIUS) announced last week, was - claimed Broadcom - initiated following a complaint by Qualcomm directly.

Huawei has a dominant position in China, which is set to become the world's biggest 5G market by far, and has also made inroads in the rest of world to compete with rivals such as Ericsson (ERICb.ST) and Nokia (NOKIA.HE) in several lucrative markets, including countries that are longstanding USA allies.

"Nobody knows for sure, but there is a suspicion going around that Broadcom's ultimate goal is to help Huawei and that this play is an attempt to squelch American 5G development", Rosenzweig wrote recently on the Lawfare national security blog.

Broadcom said it "strongly disagrees" a tie-up could raise national security concerns and had pledged to invest to ensure U.S. leadership in 5G, the superfast networks crucial to robotics, connected cars, and other smart devices.

It's hard to see a path to this deal taking place following Trump's actions with the executive order. The proposed concerns being, Chins getting the upper hand in mobile communications.

More news: Green Bay Packers are releasing WR Jordy Nelson

There have been concerns within the mobile industry that a Broadcom takeover would delay the rollout of 5G, such is Qualcomm's influence.

The U.S. government's CFIUS had legitimate concerns the proposed acquisition would slow down Qualcomm's push into 5G technology.

The president concurs. And so endeth the proposed union of Qualcomm and Broadcom, a brief shining dream that nobody seems to have wanted, no one seems to have thought would do anybody much good, and which came with risks to national security that left everyone in the room cold.

"The Purchaser and Qualcomm shall immediately and permanently abandon the proposed takeover", reads the presidential order.

But in general terms, the panel said the national security concerns stemmed from "risks associated with Broadcom's relationships with third-party foreign entities" as well as potential for Broadcom's business moves to have national security implications for the USA, via Qualcomm. That's probably a mergers-from-hell kind of scenario for competitors, including Samsung and Huawei, both when it comes to 5G networking technology but also other chip tech that's now in use in all sorts of smartphones and connected devices. The U.S. president has suggested further steps may be taken to rectify the country's trade imbalance with economies such as China.

"It is not that rare for the government to block acquisitions, said Avi Greengart, research director for connsumer platforms and devices at GlobalData".

A week before making his first offer, Hock Tan, CEO of Broadcom, announced that he was repatriating the company to the United States at a ceremony in the Oval Office with Donald Trump.

Like this: