Trump Blocks Biggest Tech Deal in History: Here's Why

President Trump says Broadcom must pull out of attempt to buy Qualcomm

Citing national security concerns voiced by the U.S. Department of the Treasury's Committee on Foreign Investment in the United States (CFIUS), the White House yesterday prohibited any takeover, acquisition, or merger bid for Qualcomm by Broadcom.

The Committee on Foreign Investment in the United States (CFIUS), which raised concerns about the Qualcomm deal with Trump, listed the highly leveraged nature of Broadcom's bid for its larger rival as a major concern coupled with the risk of the USA losing mobile technology leadership.

Although its name isn't widely known outside the technology industry, Qualcomm is one of the world's leading makers of the processors that power many smartphones and other mobile devices. President Trump's order clearly says that the Broadcom-Qualcomm acquisition or merger is not possible, and that the Broadcom proposed members on Qualcomm's board are disqualified.

Now President Trump Blocks Broadcom Takeover Bid for Qualcomm on Security Grounds.

"There is credible evidence that leads me to believe that Broadcom Limited... through exercising control of Qualcomm Incorporated (Qualcomm), a DE corporation, might take action that threatens to impair the national security of the United States". Trump's order blocks those nominees and orders the rescheduling of a stockholder meeting, which Qualcomm said would take place March 23.

In a statement to Observer, Broadcom said it is reviewing the executive order and "strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns".

The order further requires both Broadcom and Qualcomm to certify with the CFIUS that the takeover effort has been terminated, and to provide details with "a timeline for projected completion of remaining actions". However, Broadcom stated that it had fully complied with the interim orders. This is the first time a current USA president has halted a deal over national security concerns before the deal was even agreed. Last year, Trump prohibited the $1.3bn purchase of Lattice Semiconductor Corporation by Canyon Bridge Capital Partner. In September, Trump blocked a Chinese state-owned company from acquiring an American semiconductor firm.

The staff at Qualcomm's offices are likely breathing a sigh of relief at the governmental intervention, given that the Snapdragon manufacturer was doing its best to resist the takeover, claiming that it was undervalued. Its options are "not many, and not good", Michael Gershberg, an attorney with Fried, Frank, Harris, Shriver & Jacobson LLP, who has experience with CFIUS cases, told The Wall Street Journal.

Despite the fact that these were just rumors, Broadcom shares saw an 8.3% spike, taking the company's share price to $275 in extended hours trading. The company had been riding high and innovating quickly, and its acquisition by Broadcom, which has been pushed to the sidelines, threatened to ground everything to a halt. The deal also was doomed by an activist CFIUS that has recently moved to block a number of cross-border technology deals, including German chip maker Infineon Technologies proposed $850 million deal previous year to acquire Cree Inc.'s RF components unit. "‎This action does not bode well for robust cross border M&A activity in a number of sectors".

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