Trump blocks $117bn Qualcomm acquisition over national security concerns

It had suddenly realised that Broadcom’s takeover would threaten Qualcomm’s leadership in developing the next generation of wireless technology. The company raised its bid for the acquisition of rival Qualcomm to $121 billion last month after the latter rejected a $103 million offer in November 2017. The President citing national security concerns ends the speculation of what would have been the technology industry’s biggest buyout deal ever. Pentagon officials insisted on a review of Broadcom’s proxy battle, while Treasury had pushed back, according to people familiar with the matter.

China is said to be the main reason behind Trumps decision, USA daily The New York Times said.

The Trump administration, however, has defended the move.

CFIUS has already blocked a number of takeovers of U.S. corporations since Mr Trump became president and the use by the White House of its report last week, in justifying this decision, suggests it will be used again in the future as part of the President’s policy arsenal. Intel, a USA competitor, also rose.

The deal was under scrutiny by a national-security panel called the Committee on Foreign Investment in the United States, or CFIUS, which advises Trump.

The White House said the President was acting on the recommendation of the Committee on Foreign Investment in the United States, which reviews foreign purchases of USA companies, to reject the proposed $117bn offer on national security grounds.

Over the past few years, a number of high-profile tech acquisitions have fallen apart due to “national security” concerns from Washington and CFIUS, an inter-agency branch of the Treasury Department responsible for overseeing cross-border acquisitions. Lawmakers accused the company of having close links to Beijing, and said it posed a threat to United States national security.

The president’s decision is highly unusual and is only the fourth time in the past three decades that a United States president has intervened directly to scupper a foreign investment deal. Broadcom is better known for selling assets and growing through acquisitions rather than R&D.

In recent years, presidents have given particular scrutiny to semiconductor companies.

While the letter did not specify any specific entities, the letter addressed Qualcomm as the leading company in 5G tech and development and setting new tech standards. However, it is not clear what rules Broadcom would have to follow if it goes ahead with announced plans to move its headquarters to the United States.

Broadcom said in a statement: “Broadcom strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns”. The Trump administration is considering clamping down on Chinese investments in the US and imposing tariffs on a broad range of its imports to punish Beijing for its alleged theft of intellectual property. But US concerns about China mean that the deal is now very much off the table.

The CFIUS action was actually prompted by a request from Qualcomm, which was unusual because the committee usually doesn’t review anything until an actual deal has been agreed to. The order further bars Broadcom’s nominees for standing for election on Qualcomm’s board of directors, the route that Broadcom was pursuing after the board of directors previously voted against Qualcomm accepting Broadcom’s deal.

Now that Broadcom has been shoved aside, Qualcomm will be under pressure to prevent its stock price from sinking while trying to complete its own proposed takeover – a proposed $43 billion purchase of NXP Semiconductors.