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Trump blocks Broadcom’s takeover of Qualcomm


President Trump has blocked Broadcoms proposed $117 billion buyout of Qualcomm over security concerns, according to a White House statement.  News of the presidents decision was first reported by CNBC. The move could send shockwaves rippling through the broader global economy, as the president continues his push to put America first in trade negotiations with global partners. Broadcoms acquisition offer, which was a risky prospect heading into todays decision from the White House, isnt the first time that the president has blocked a deal. But the proposed deal between the two chipmakers had broad implications for the entire technology industry and the ramifications of the presidents decision will be enormous. The combination of the two chipmakers would have potentially been the biggest tech merger of all time, and would have brought together two of the largest companies that manufacture the processors that power phones, computers and almost the entire array of connected devices. Its a saga that had played out for months amid resistance from Qualcomm — and more recently the US government, whose Committee on Foreign Investment in the United States (CFIUS) last week said it would be investigating the deal on the grounds of national security. In an unprecedented move, Qualcomm actually approached CFIUS to quash the Broadcom bid — as TechCrunch reported over the weekend. Originally… analysts thought that CFIUS was responding to pressure from Congress to act unilaterally on the proposed deal. What we have learned though is that Qualcomms board had secretly asked CFIUS to review the transaction on January 29th this year. In other words, Qualcomm is using Americas regulatory authority as a potential weapon to thwart Broadcoms bid and protect itself. Its a brilliant maneuver, and also fairly unprecedented: CFIUS is usually only engaged once both parties to a transaction have finalized a deal and submitted it for review. Broadcom attempted to avoid CFIUS by re-domiciling to the US, announcing today that it would complete the transition by April 3. That wasnt fast enough though and likely prompted the President to pull his already itchy trigger finger to quash the deal. Despite the decision by President Trump to act as a white knight from the White House and save Qualcomm from Broadcoms clutches, the company still faces some daunting challenges. Its still facing a looming lawsuit from Apple over allegedly unfair business practices and it has yet to fully digest its acquisition of NXP. It was amid these woes that the company was forced to restructure its board. Last week the company said that Dr. Paul E. Jacobs will no longer serve as executive chairman for the companys board of directors. While he will remain a director, the move was a sign from Qualcomms board that it recognized all was not well at the venerable chipmaker. The NXP acquisition was actually central to Qualcomms argument that it is undervalued.  At one point the company wrote an open letter to Broadcom, stating that your proposal ascribes no value to our accretive NXP acquisition, no value for the expected resolution of our current licensing disputes and no value for the significant opportunity in 5G. Your proposal is inferior relative to our prospects as an independent company and is significantly below both trading and transaction multiples in our sector. In other words, it doesnt think Broadcom is appreciating the value gathered from Qualcomms recent acquisition of NXP Semiconductor.  It also believes that Broadcom is underestimating Qualcomms potential 5G wireless technology. The 5G factor was critical to the presidents decision to block the bid. A letter from the Treasury Department, released last week, actually laid out the case for the presidents rejection. In it, CFIUS said that Broadcoms history of slashing research spending and its ability to compromise Qulacomms assets through relationships with foreign governments was concerning. Theres a race on for global influence over the newest 5G connectivity technology — which holds out the promise of super fast connectivity to enable the autonomous, automated future of driving and manufacturing that tech executives salivate over. Its one reason why Google and Microsoft were vocal in their opposition to the Broadcom acquisition. Qualcomm acknowledged receiving the Presidential order with the following statement: Qualcomm Incorporated (NASDAQ: QCOM) today received a Presidential Order to immediately and permanently abandon the proposed takeover of Qualcomm by Broadcom Limited (NASDAQ: AVGO).  Under the terms of the Presidential Order, all of Broadcoms director nominees are also disqualified from standing for election as directors of Qualcomm. Qualcomm was also ordered to reconvene its 2018 Annual Meeting of Stockholders on the earliest possible date, which based on the required 10-day notice period, is March 23, 2018.  Stockholders of record on January 8, 2018 will be entitled to vote at the meeting.

Broadcom will relocate to U.S. by April 3 to speed security review of Qualcomm bid


Hoping to avoid a prolonged national security review, Singapore-based Broadcom said it will move its international headquarters back to the U.S. by April 3 as it continues a hostile takeover bid for rival Qualcomm. In a press release today, Broadcom confirmed the date for the first time while also emphasizing its roots in the U.S. Indeed, the whole snarled mess surrounding the notion of a foreign company buying a prize like Qualcomm goes right to the heart of what one means by U.S. company. Politicians are worried by the thought of an Asia-based company seizing control of Qualcomm, which is emerging as a leader in next-generation 5G chips. Qualcomms board has fought the bid since last November even as Broadcom raised the price to $121 billion. Last week, the U.S. Treasurys Committee on Foreign Investment in the United States (CFIUS) released a letter saying it was reviewing the transaction for national security risks, putting the deal temporarily on hold. This was not entirely surprising and was one of the reasons Broadcom announced at a ceremony with President Trump last November that it plans to relocate to the U.S. The company said in its press release today that it supports the CFIUS process and noted that the agency had previously reviewed and cleared its acquisition of Brocade in November 2017. At the close of that transaction, Broadcom agreed to relocate. The move to the U.S. will be a homecoming for a company that in many ways never really left. Broadcom began life in Irvine, California as a fabless semiconductor company. It was acquired in 2016 by Avago Technologies, which started as a product division of Hewlett-Packard and was spun off in 1999 into Agilent Technologies. After that deal, Avago renamed itself Broadcom and established joint headquarters in Singapore and San Jose. In many ways, what Broadcom refers to as a plan to redomicile to the U.S. is a largely symbolic move. The company hasnt said how many executives or what, if any, operations may be shifted. But it emphasized that it believes the change should eliminate any fears around national security. In short, U.S. national security concerns are not a risk to closing, as Broadcom never plans to acquire Qualcomm before it completes redomiciliation, the company said. Whether that does actually satisfy the CFIUS remains to be seen. Meanwhile, amid delays in reaching a deal, rumors have emerged that rival Intel is considering making a bid for Broadcom.