Massive Qualcomm takeover is on hold after USA government intervention

Massive Qualcomm takeover is on hold after USA government intervention

US regulators have asked giant chipmaker Qualcomm to delay an annual shareholder meeting to give them more time to investigate whether a takeover bid by Broadcom, a Singapore company that is in the process of moving to San Jose, would threaten USA national security.

The Committee on Foreign Investment in the United States (CFIUS), which has the power to stop deals that could harm national security, asked Qualcomm to postpone the annual meeting and election of directors by 30 days.

Qualcomm has hit back against Broadcom's criticism of a CFIUS request and has called the firm's comments "dismissive rhetoric" created to mislead shareholders. Whether that contact would have led the CFIUS to tip off an impending investigation of the deal to Broadcom is another question. The interagency body, which is known as Cfius, includes representatives from the Treasury and Justice Departments.

Qualcomm's shares fell 2 percent in trading before the bell. It's the latest major salvo in one of the largest biggest deals of all time to acquire the $95 billion fabless chipmaker in what would be a massive consolidation of the industry owned by Singaporean-based Broadcom.

Separately, Broadcom said on Monday that the decision by CFIUS was the result of secret moves made by Qualcomm on January 29 to encourage an investigation into the offer, which Qualcomm's board has said significantly undervalues the company. The company already is run from the United States, has many US employees, and owns critical semiconductor operations and technologies, Rasgon noted.

Broadcom had hoped to install six friendly board members at a shareholder meeting Tuesday, which would effectively give Broadcom control and allow a vote for Qualcomm to accept Broadcom's acquisition offer.

In dueling statements, Broadcom officials claimed the investigation was undertaken at Qualcomm's request without their knowledge, while Qualcomm officials said the suggestion that the CFIUS investigation was coming as a surprise to Broadcom "has no basis in fact".

Analyst Stacy Rasgon at Bernstein Research doesn't see much likelihood that the CFIUS national security review would find grounds to block a merger.

Broadcom has been trying for months to take over Qualcomm in a blockbuster $95 billion deal that would massively consolidate the semiconductor market. That will not be final until the end of Broadcom's fiscal year May 6, the company said. Getting NXP into the fold would increase Qualcomm's presence in such areas as 5G, the internet of things and autonomous vehicles.

Broadcom Ltd. is on course to win all six of the seats it's seeking on Qualcomm Inc.'s board, giving it a majority to push forward with its hostile takeover even as a USA government panel forced a delay of the final tally amid concerns about the deal's threats to national security.

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