Government Worries China Will Profit From Hostile Takeover Of US Company

Broadcom's Qualcomm bid gets a kick in the groin from the US government

Broadcom also claimed that Qualcomm did not disclose the request to Broadcom.

Additionally, U.S. officials speaking on condition of anonymity said members of Congress and Federal Communications Commission officials were concerned that Broadcom could sell part of Qualcomm to a Chinese firm.

Qualcomm just concluded its 5G day in San Diego, California, where it showed off a number of new demos showcasing what the new Snapdragon 845 can do.

Broadcom, the Singapore-based tech firm that has been aggressively trying to take over Qualcomm, is promising to start a new $1.5 billion US innovation fund amid a federal investigation into the national security implications of its bid for the USA chip manufacturer. But no, its the Committee on Foreign Investment in the United States (CFIUS) that caused the shareholder meeting to be delayed by 30 days. CFIUS also intends to investigate whether the deal would limit the supply of Qualcomm products or services to the USA government, or whether it would threaten the integrity of those products and services.

Broadcom used to also be a USA company until it relocated to Singapore in 2015 for tax purposes, and it is in the process of reincorporating in the U.S.

The government's action highlighted growing United States concerns about safeguarding semiconductor technology and cast a doubt on the deal's success.

"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", it said in the statement. This means the US government is going to look into whether Broadcom's acquisition of Qualcomm can threaten the national security of the U.S. That would have opened the door further to Broadcom taking over Qualcomm.

Qualcomm investors can likely expect some more volatility from the company before all of this is resolved and, unfortunately, it's yet another dramatic turn as shares continue to underperform the market.

With CFIUS examining the deal, Qualcomm now can work to close its pending $43 billion of NXP Semiconductors to diversify its business beyond smartphones, attempt to make progress on patent licensing disputes with Apple and try to construct a stronger case to shareholders to remain a stand-alone company, said Rasgon.

The letter was only made public by Qualcomm on Tuesday 6 March and is a rarity as the CFIUS rarely weighs in on deals it is examining.

Chinese tech companies have been aggressively pursuing 5G technology at the urging of their government.

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