President Donald Trump blocked Singapore-based Broadcom Limited’s planned takeover of U.S. chipmaker Qualcomm Monday after an investigation determined the foreign company “might take action that threatens to impair the national security of the United States,” reports The Daily Caller.
The union would have been one of the largest tech mergers in history valued at $117 billion, and a rare case of a foreign company’s hostile takeover of a U.S. firm.
Trump’s order prohibits Broadcom’s proposed takeover of Qualcomm as well as “any substantially equivalent merger, acquisition, or takeover, whether affected directly or indirectly.” Trump reserved his authority to issue further commands on the merger, the order added.
Broadcom’s first bid to take over Qualcomm in November, days after Broadcom CEO Hock Tan visited the White House and vowed to move his Singapore company to the U.S. through a process known as re-domiciliation. Broadcom would complete the restructuring process to move its headquarters to the U.S. in May, it announced in early 2018.
“Qualcomm filed a notice of Broadcom’s plans with the Committee on Foreign Investment in the U.S. (CFIUS) in January 2018. The administration and members of Congress then became concerned about the national security issues of handing over the largest domestic semiconductor manufacturer and leader of 5G technology to a foreign entity. Some were concerned Broadcom may break up parts of company, ceding strategic ground in telecommunications development to China,” the Daily Caller reports.
Broadcom attempted a hostile takeover by purchasing proxy votes to install six friendly board members on Qualcomm’s 11-member board when Qualcomm rejected the offers.
CFIUS stepped in and through an interim order directed Qualcomm to postpone its board meeting, scheduled for March 6, for 30 days. The committee also ordered Broadcom to give five days notice on any action to expedite the move to become a U.S. company and possibly prevent the committee from having the authority to intervene.
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 Treasury, which manages the CFIUS process. Broadcom announced Monday it would be a full U.S. company April 3, days before the rescheduled Qualcomm board meeting.
Trump’s order disqualifies the 15 potential board members Broadcom hoped to install from serving on Qualcomm’s board. The order also directed both companies to certify on a weekly basis that the merger is off.
This is the first foreign acquisition Trump has blocked as president. Broadcom is reviewing Trump’s order and “strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns,” the company said in a statement.
The Treasury Department said it had both classified and unclassified reasons the merger should be investigated. Qualcomm is the largest maker of critical semiconductors that power electronic devices from servers to mobile phones and is a global leader in developing 5G networks. It also has classified contracts with the Department of Defense, according to the Treasury Department.
“Qualcomm has become well-known to, and trusted by, the U.S. government,” the Treasury Department said in a March 6 letter. “Having a well-known and trusted company hold the dominant role that Qualcomm does in the U.S. telecommunications infrastructure provides significant confidence in the integrity of such infrastructure as it relates to national security.”