Tech's biggest takeover could be blocked by the U.S. government

Citing security Republicans support CFIUS review of Broadcom bid for Qualcomm 0

Broadcom cried foul, saying this latest turn of events is an "engagement theatre", aimed at changing the will of Qualcomm stockholders. The company is in the midst ofreincorporating in the U.S., and has said it expects the move to be completed in the coming weeks.

The Treasury Department's concern is both over national security issues and a fear China would be able to gain a strategic advantage in future 5G networks development.

In a letter to the two companies, a senior US Treasury official said there were enough national security risks in this deal that it warrants a full investigation.

The Committee on Foreign Investment in the United States (CFIUS) has been reviewing the acquisition on a request from Qualcomm.

The big deal going on between tech giants in Broadcom and Qualcomm is reaching new levels, with a U.S. government national security panel seeing potential risks in Broadcom's want to acquire Qualcomm.

Over the weekend, the government asked Qualcomm, which is based in San Diego, to delay its annual shareholder meeting by 30 days as it conducts its review. Broadcom then attempted to force a vote to install six new members on the 11-person board, who would effectively do Broadcom's bidding, but the USA government intervened. The agenda includes director elections that could give board control to nominees of Singapore-based Broadcom. That's a concern for the government, as Qualcomm is critical to maintaining the US's position of leadership in semiconductors and wireless networking.

Broadcom has been ratcheting up the pressure on shareholders of rival chipmaker Qualcomm this week - even as the landscape surrounding the hostile takeover becomes more tenuous. So far, Qualcomm's board has rejected Broadcom's $79 per share bid for being too low and for failing to provide enough protection should regulators block the takeover. It lends weight to Qualcomm's argument that the hostile bid would struggle to get regulatory sign-off. 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.

This letter from CFIUS is a big speed bump in the road to Broadcom buying Qualcomm - and it's likely more like a roadblock.

These days, the USA government is keeping Chinese companies at bay while mentioning national security.

The deal's pushback on national security grounds is seen by some as trade posturing by the Trump administration against China.

Treasury's letter cited Chinese chip maker Huawei as a competitive threat in the development of 5G. 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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