US Reviews Broadcom's Bid for Qualcomm

07 March, 2018, 00:24 | Author: Larry Hoffman
  • Broadcom return to US could be complete in May

Citing a request from the USA government, Qualcomm delayed by at least 30 days a shareholder meeting that could have decided the fate of Broadcom's hostile bid to acquire the company.

"In compliance with the CFIUS order, Qualcomm will delay its annual meeting of stockholders and election of directors for at least 30 days so that CFIUS can fully investigate Broadcom Limited's proposal to acquire Qualcomm", the company said.

Qualcomm supplies wireless communication chips for most Android mobile devices and several iPhone models and owns patents that allow it to collect royalties from almost every smartphone sold worldwide.

The semiconductor industry is locked in a race to develop chips that power so-called 5G wireless technology, allowing the transmission of data at faster speeds.

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With each passing day, we seem to get a new development in Broadcom's attempt to take over Qualcomm. In practice, reviews by CFIUS often lead to the demise of deals.

Additionally, US officials speaking on condition of anonymity said members of Congress and Federal Communications Commission officials were concerned that Broadcom could sell part of Qualcomm to a Chinese firm. "The U.S.is now in a race with China in the development of 5G technologies, a race that will have profound impact on critical U.S. telecommunications infrastructure and on U.S. national security for years to come".

CFIUS' intervention was unusual in that the panel typically reviews signed deals. Unsurprisingly, Broadcom says this is a desperate move on the part of Qualcomm to stop the takeover. To keep the deal alive, Qualcomm announced today that it extended its offer until March 9 at 5 p.m. ET.

Qualcomm's shareholder meeting was set to include a vote on whether to replace six of its 11 directors with nominees put forward by Broadcom.

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Broadcom shares closed down 1.6%, while Qualcomm fell 1.3%.

Unfortunately for Broadcom, that last point is playing out already due to action taken by the Committee on Foreign Investment in the United States (CFIUS). Despite those issues, Qualcomm officials have met with Broadcom executives and last month kept open the possibility of continued talks over price and other concerns.

As a result, Broadcom's business plan for Qualcomm, including any divestitures it plans in order to appease antitrust regulators, will be scrutinized by CFIUS, lawyers who advised companies on their CFIUS applications said. Broadcom shareholders are expected to vote on the move in early May. In the case of Qualcomm, the panel, which includes representatives from multiple government agencies, is looking at the acquisition before it is complete.

On Sunday, CFIUS instructed Qualcomm to delay by 30 days its annual shareholder meeting, which had been scheduled for Tuesday. "Broadcom reiterates that Qualcomm failed to disclose to its own stockholders and to Broadcom that it secretly filed a voluntary unilateral request for CFIUS review on January 29, 2018", the company wrote.

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