Trump blocks $117bn Qualcomm takeover citing national security

Ruben Ruiz
March 15, 2018

On Monday, the Trump administration issued an order blocking Broadcom's $117 billion hostile bid for rival Qualcomm (NASDAQ:QCOM) on national security grounds, in a move that could effectively end the Singapore-headquartered Broadcom's pursuit of the us communications technology giant.

Donald Trump has exercised rarely-used powers to block the hostile takeover of mobile chipmaker Qualcomm by Singapore-based rival Broadcom. Trump's blocking order also eliminates all the fifteen directors that Broadcom proposed for Qualcomm. "Broadcom is reviewing the Order".

"Any transaction or other device entered into or employed for the objective of, or with the effect of, avoiding or circumventing this order is prohibited", Trump wrote in the order.

The letter continued, explaining that, "given well-known US national security concerns about Huawei and other Chinese telecommunications companies, a shift to Chinese dominance in 5G would have substantial negative national security consequences for the United States".

"Details of the security risk are likely around 5G cellular technology [where] Qualcomm, in our view, is well ahead of foreign and domestic competitors", said Stifel analyst Kevin E. Cassidy in a report late Monday.

Broadcom may be Singapore-domiciled, but it was originally an American company, still has the majority of its staff and office space in the USA, and had announced plans to re-domicile there. Last week, the CFIUS issued an interim order to Qualcomm directing it to postpone its annual stockholders meeting and election of directors by 30 days.

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Trump's order was based on a recommendation by the Committee on Foreign Investment in the United States (CFIUS), a multi-agency panel led by the U.S. Treasury Department that reviews national security implications when foreign entities take over U.S. corporations.

First, it appears that Broadcom doesn't yet have a Plan B.

The company's prospects in the largest Asian market have grown brighter just as its relations with its most important customer, Apple, have soured considerably over the chip giant's licensing practices. For one thing, it is only going to become harder for foreign tech companies - not just Chinese - to acquire U.S. technology businesses as the White House appears receptive to any argument around the diminution of American corporate might.

Trump disagreed with this line of reasoning, however.

"The proposed takeover of Qualcomm by the Purchaser is prohibited, and any substantially equivalent merger, acquisition, or takeover, whether effected [sic] directly or indirectly, is also prohibited".

"We all know that China has been rapacious about trade and very smart. Better to keep it in American hands and protect American national security", Cotton said. If Qualcomm's "technological leadership" diminishes, Mir said in his March 5 letter, Chinese tech companies stand to gain in the race to develop 5G.

Other reports by GizPress

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