Broadcom And Qualcomm Trade Blows As US Regulators Consider National Security Concerns

Broadcom's courtship of Qualcomm just got a bit more interesting. Broadcom began a hostile bid for Qualcomm late last year, and has largely been rebuffed for its advances. However, in recent weeks, Qualcomm has become more receptive to Broadcom's proposal -- that is if the company can sweeten its offer price and pass regulatory oversight.

Unfortunately for Broadcom, that last point is playing out already due to action taken by the Committee on Foreign Investment in the United States (CFIUS). In this case, the CFIUS is stepping in early in the process, and is asking Qualcomm to delay its planned March 6th annual shareholder meeting. The CFIUS is tasked with reviewing acquisitions that could have implications on national security. What's odd in this case, however, is that the review board doesn't typically step in until after an announcement has been made by two parties that an agreement has been made.

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“The Committee on Foreign Investment in the United States (CFIUS) issued an interim order to Qualcomm directing it to postpone its annual stockholders meeting and election of directors by 30 days," said the U.S. Department of the Treasury on Sunday in an official statement. "This measure will afford CFIUS the ability to investigate fully Broadcom’s proposed acquisition of Qualcomm.”

If approved -- which is looking more unlikely as we slog deeper into 2018 -- it would be the biggest technology deal in history.

However, things are getting particularly nasty with this proposed acquisition, and both sides are lobbing grenades at each other. "Broadcom was informed on Sunday night that on January 29, 2018, Qualcomm secretly filed a voluntary request with CFIUS to initiate an investigation, resulting in a delay of Qualcomm’s annual meeting 48 hours before it was to take place," said Broadcom in a statement this morning.

"This was a blatant, desperate act by Qualcomm to entrench its incumbent board of directors and prevent its own stockholders from voting for Broadcom’s independent director nominees.”

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Of course, Qualcomm, which isn't exactly sold on the idea of an arranged marriage with Broadcom, didn't hold back:

Broadcom Limited’s response to the order from the Committee on Foreign Investment in the U.S. (CFIUS) is a continuation of its now familiar pattern of deliberately seeking to mislead shareholders and the general public by using rhetoric rather than substance to trivialize and ignore serious regulatory and national security issues. CFIUS is an independent, multi-agency U.S. governmental body charged with protecting U.S. national security. CFIUS has determined that there are national security risks to the United States as a result of and in connection with the transaction proposed by Broadcom.

Broadcom’s dismissive rhetoric notwithstanding, this is a very serious matter for both Qualcomm and Broadcom. Broadcom’s claims that the CFIUS inquiry was a surprise to them has no basis in fact. Broadcom has been interacting with CFIUS for weeks and made two written submissions to CFIUS.

The gloves are definitely coming off between Broadcom and Qualcomm, and this latest incident only helps to further inflame the tensions between the two companies.

Thumbnail and Top Image Source: Wikimedia Commons via Coolcaesar



Via:  FT
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