Published: Wed, March 07, 2018
Markets | By Rosalie Gross

Legislators concerned over Broadcom, Qualcomm deal

Legislators concerned over Broadcom, Qualcomm deal

While numerous specific concerns of CFIUS are classified, the body disclosed that it's looking at "the risks associated with Broadcom's relationships with third party foreign entities", as well as the "national security effects of Broadcom's business intentions with respect to Qualcomm", according to the letter, which was written by a Treasury Department official.

A view of the US Treasury building, seen in Washington, DC on June 21, 2017.

Sen. Tom CottonThomas (Tom) Bryant CottonGOP looks for Plan B after failure of immigration measures Senate rejects Trump immigration plan Our intelligence chiefs just want to tell the truth about national security MORE (R-Ark.), who has urged a crackdown on Huawei's forays into the USA market, praised the CFIUS intervention on Monday.

In the letter from the Treasury official, the government said it was important to have a well-known and trusted company "hold the dominant role that Qualcomm does in the US telecommunications infrastructure".

The move complicates an already contentious deal and increases the likelihood that Broadcom, which is based in Singapore, will end its pursuit of Qualcomm.

The US government is concerned that Chinese companies, including the big network equipment and mobile phone maker Huawei Technologies, will take advantage of any openings to take the lead in the next generation mobile phone networks known as 5G.

At present, Qualcomm, the largest 4G chipset manufacturer in the world, is competing with Chinese companies like Huawei over 5G chipset development.

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Qualcomm's shareholder meeting is now scheduled for April 5.

A CFIUS review in itself does not mean a deal will be halted. The panel also advised against a deal between Chinese-backed private equity firm Canyon Bridge and US chipmaker Lattice Semiconductor Corp, leading president Trump to block the proposal in September 2017.

The Department of Treasury broadened the scope of the inquiry to look at Broadcom's hostile takeover bid as well. Broadcom is on track to win all six of the seats it's seeking, giving it a majority of the board to push ahead with its hostile $117 billion bid.

Cornyn said on Monday he was glad CFIUS had chose to review the deal, noting aggression by "international rivals, like China".

Broadcom has struggled to complete its proposed deal to buy Qualcomm as the latter has resisted, citing several concerns including the price offered and potential antitrust hurdles.

Broadcom still is moving ahead, and the company believes it can work things out with the CFIUS in time for Qualcomm stockholders to vote for a new Board run by Broadcom. Broadcom's take-over bid is being derailed by its move to Singapore to avoid paying taxes. Broadcom just has to wait, move back to the United States, and that will be one obstacle it does not have to worry about.

Qualcomm on Monday extended its $44 billion tender offer for NXP to March 9, as it awaits clearance from China's MOFCOM, the only regulator globally required to approve the deal that has yet to do so.

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