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08 March 2018, 01:34 | Kara Nash
Qualcomm takeover bid halted by US government
The review will be conducted by the Committee on Foreign Investment in the United States (CIFUS), a body chaired by the US Treasury that can recommend deals be blocked.
Now, with Qualcomm using the CFIUS investigation as reason to push back the shareholder vote on the acquisition until at least April, Broadcom is launching its own charm offensive and pledging to pour money into the USA research and education fields with its $1.5bn fund promise. However, many of Qualcomm's rivals, including Huawei Technologies Co Ltd, are Chinese.
It seems the US government is concerned over the possibility that Chinese companies can obtain the 5G technology of the U.S.as a result of Broadcom's acquisition of Qualcomm. It wants to make sure Qualcomm does not lose its status as a dominant player in wireless chip technology, according to a source familiar with the panel's thinking.
The investigation by CFIUS, which considers national security risks to foreign acquisitions of United States companies, came after Qualcomm filed a notice with the panel seeking a review. Besides, the U.S. Congress is planning to give more power to the CFIUS.
Last month, USA semiconductor testing company Xcerra Corp said CFIUS had blocked its $580 million sale to a Chinese state-backed semiconductor investment fund.
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.
"Qualcomm is a leader in 5G technology, which is going to be the new standard in the future".
The deal was expected to face tough scrutiny from competition regulators. The move showed an uncharacteristic sense of urgency, as reviews are usually triggered after deals have been agreed to.
It's been an extremely busy couple of months for both Qualcomm and Broadcom, as the latter continues to pursue a hostile takeover. Qualcomm's board has rejected the offer, and a few days ago it urged shareholders to reelect its members at the annual shareholder meeting that had been scheduled for March 6.
"It should be clear to everyone that this is part of an unprecedented effort by Qualcomm to disenfranchise its own stockholders", said Broadcom. But the day before, Qualcomm said the vote had to be put on hold; a government committee led by the US Treasury Secretary needed time to investigate a potential merger.
"The rules say that one party alone could approach CFIUS and for a review", said McDermott Will & Emery LLP regulatory lawyer David Levine. "Broadcom has been interacting with CFIUS for weeks and made two written submissions to CFIUS". The company is now based in Singapore, but said in November that it will move its legal headquarters back to the United States.
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