Mar 13 2018 by Johnny Bowman
In such a scenario, Broadcom - which now works under the laws of Singapore - would have been considered as an American company and thus its proposed Dollars 117 billion would have been considered outside the preview of a federal agency - Committee on Foreign Investment in the United States (CFIUS) that reviews foreign deal.
A building on the Qualcomm campus is seen, as chip maker Broadcom Ltd announced an unsolicited bid to buy peer Qualcomm Inc for $117 billion, in San Diego, California, US. But those talks failed to change the regulator's belief that the takeover posed a potential national security risk.
CFIUS is a multiagency panel of the US government that has become more active during the Trump administration.
Immediately upon completion of all steps necessary to terminate the proposed takeover of Qualcomm, the Purchaser and Qualcomm shall certify in writing to the Committee on Foreign Investment in the UnitedStates (CFIUS) that such termination has been effected in accordance with this order and that all steps necessary to fully and permanently abandon the proposed takeover of Qualcomm have been completed. The inter-agency panel is chaired by the Treasury Department and vets deals that could give a foreign investor control of a U.S. business. "In short, USA national security concerns are not a risk to closing, as Broadcom never plans to acquire Qualcomm before it completes redomiciliation". Intel has reportedly been watching the Broadcom-Qualcomm situation with interest, for example.
The Treasury Department letter was "obviously a poison pill", said Jim Lewis, a CFIUS expert at the Center for Strategic and International Studies, who described the communication to Broadcom as "unprecedented". CFIUS ordered the shareholder vote be postponed to investigate the transaction.
Broadcom's relocation was originally scheduled to be completed by May 6.
Heightened US security protection has already drawn resistance from some big US companies, concerned that the expansion of CFIUS's role would put the business environment into jeopardy. It also participated in the hearing after CFIUS informed the company that its notice was inadequate.
Trump hosted Broadcom CEO Hock E. Tan in the White House previous year when the executive announced the proposed move. Since the deal was announced, Qualcomm's shares never broke $67.
CFIUS experts are uncertain whether the agency's authority extends to acquisitions involving two USA based firms - though CFIUS has already asserted jurisdiction and launched its probe while Broadcom remains headquartered in Singapore. "Broadcom's claims that the CFIUS inquiry was a surprise to them has no basis in fact", Qualcomm said in a statement.
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For instance, the United States committee cleared Beijing-based Naura Microelectronics Equipment Co in January to buy USA semiconductor manufacturing equipment maker Akrion Systems LLC.
In an effort to alleviate these concerns, Broadcom has been rushing to redomicile (legally move the company) to the United States. Lawmakers have raised the question of whether the absence of a CFIUS review would have encouraged other suitors to use proxy fights to gain effective control of American companies, and I've wondered whether others might go all the way and relocate to ease the regulatory process.
President Trump on Monday blocked Broadcom's bid for the chip maker Qualcomm, citing national security concerns. The initial offer was declined by Qualcomm's board of directors, as was every subsequent counter offer.
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.
The company's hostile takeover attempt has come at a vulnerable time for Qualcomm, which has been embroiled in a long-running legal dispute with Apple and is facing several large fines from governing bodies across the globe, including a $1.23 billion fine recently levied against the company for breaking the European Union's antitrust laws.
Under the order, the Trump administration cites concerns that a Broadcom takeover of Qualcomm could "impair the national security of the United States".
Huawei has a dominant position in China, which is set to become the world's biggest 5G market by far, and has also made inroads in the rest of world to compete with rivals such as Ericsson and Nokia in several lucrative markets, including countries that are longstanding US allies.
Broadcom has pledged to continue Qualcomm's hefty research and development spending for 5G networks and to maintain Qualcomm's status as a trusted supplier to the Department of Defense and other government agencies. Qualcomm is now involved in intense litigation with Apple around patents and accusations of anti-competitive behaviour. Hollencrest Securities Ltd has 0.03% invested in QUALCOMM Incorporated (NASDAQ:QCOM) for 4,360 shares.
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