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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.

Trump issues order blocking Broadcom takeover of Qualcomm, citing national security


President Donald Trump issued an order Monday evening blocking any merger of the chipmaking giants Broadcom and Qualcomm, saying it was necessary to protect national security. There is credible evidence, the order says, that if the Singapore-based Broadcom took control of the US-based Qualcomm that the company might take action that threatens to impair the national security of the United States. Broadcom has been trying to purchase Qualcomm for the last several months, but has continually been rebuffed. Its since tried to stack Qualcomms board with friendly members. Trumps order says that Broadcom will not be allowed to purchase or merge with Qualcomm in any way, and that all of the people Broadcom has proposed to Qualcomms board are disqualified. It seems that Broadcom was aware that Trump or his Justice Department might attempt to block the merger on these grounds and has been trying to avoid it. Trump has blocked similar takeovers before, having stopped a Chinese state-owned company from buying an American semiconductor firm back in September. Broadcom is currently in the process of moving its headquarters from Singapore to the US, according to Bloomberg, and planned to complete the transition by April 3rd. With the move, Broadcom seems ready to fight Trumps order. In a statement, the company said US national security concerns are not a risk to closing, as Broadcom never plans to acquire Qualcomm before it completes redomiciliation. Its not clear whether thatll be allowed to happen. Trumps order says that the two companies should permanently abandon the proposed takeover, indicating that Broadcoms move wont make a difference, unless its willing to take the order to court.