Trump blocks Broadcom's takeover bid of Qualcomm

Mae Love
March 13, 2018

The presidential block is permanent, according to Seeking Alpha, which got access to the executive order.

Trump made the call to block the takeover following a recommendation from the Committee on Foreign Investment in the United States (CFIUS), which assesses foreign purchases of U.S. entities. The inter-agency panel is chaired by the Treasury Department and vets deals that could give a foreign investor control of a United States business. These days, that means Steven Mnuchin. The takeover would have been the largest consolidation in the history of the industry.

The announcement came just hours after Broadcom CEO Hock Tan met with officials from the Committee on Foreign Investment in the United States (CFIUS) to make his case for the deal, according to a source familiar with the meeting.

The committee's findings, which are not publicly announced, are sent to the president, who may suspend or prohibit the deal.

Broadcom's suit for Qualcomm always faced long odds.

The company, the biggest maker of phone-modem chips, is also trying to complete the US$47 billion acquisition of NXP Semiconductors NV, a seller of chips to automotive and industrial companies.

Despite the deal's relatively small US$15 million price tag, Naura's success in getting the nod from CFIUS is notable.

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"Being a Singaporean company that has connections to China is just one part of the United States national security consideration", he said. But the deal collapsed in January after both sides said CFIUS refused to approve it.

Promises of jobs and tax dollars clearly only go so far with President Donald Trump. Following a Cfius review, the USA stopped Moneygram's sale to an affiliate of China's internet conglomerate Alibaba Group and the sale of Lattice Semiconductor to an investment firm with ties to the Chinese government. Canyon Bridge received investment from a group that included China Venture Capital Fund Corporation, which is owned by government-backed organizations. Last week, Trump also cited national security concerns in announcing a series of harsh tariffs on steel and aluminum imports, a move that hit rivals such as China as well as allies such as Germany and South Korea.

The statement also provided no apparent wiggle room for a deal. The move was widely perceived as an attempt to ease regulatory approval for the pending purchase of Brocade Communications Systems Inc., but Trump only had eyes for the mythical $20 billion of revenue Broadcom was supposed to bring to American towns and workers.

Broadcom, formerly Avago, had started becoming American again, but it is still officially enjoying Singapore's low-tax regime.

Stepping into the increasingly wild saga that has been Broadcom's efforts to purchase Qualcomm, the U.S. government is now weighing in by issuing a new order to block the merger of the two companies. But there has been speculation that the acquisition could undermine the ability of the United States to compete with China in the race for telecommunications supremacy.

In a statement, Broadcom said it was reviewing the order, and contested the notion that the bid posed a security threat. "This feels a little more personal to me".

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