US Asks Qualcomm to Delay Board Meeting for Review of Broadcom Deal

Broadcom return to US could be complete in May
Qualcomm says Broadcom deal opens national security issues
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06 March, 2018

Qualcomm (QCOM) has delayed its annual shareholders meeting, which had been set for Tuesday, after asking the Committee on Foreign Investment in the U.S.to investigate Broadcom's (AVGO) attempted purchase of Qualcomm.

Over the weekend, Broadcom was told that Qualcomm filed a voluntary request with the Committee on Foreign Investment in the US (CFIUS) to investigate the acquisition's potential national security issues.

Qualcomm and Broadcom were not immediately available for comment. Qualcomm shot back that Broadcom's claims that the CFIUS inquiry was a surprise to them has "no basis in fact".

The company added that the US Securities and Exchange Commission (SEC) has cleared Broadcom's preliminary proxy statement, and as Broadcom has pledged to redomicile to the US - and its board is made up of individuals which are nearly all American - CFIUS does not have to be involved in this transactions.

Qualcomm has repeatedly rejected multiple Broadcom offers that it says undervalue the company.

Weeks of thrust and parry, along with tactical public statements, have left the companies' boards at odds over the unsolicited offer.

At the now-postponed meeting, Qualcomm shareholders were going to vote whether to replace six Qualcomm board directors with Broadcom-nominated candidates, a move that could accelerate the acquisition if those candidates were elected and took a majority position on the board.

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President Donald Trump past year blocked a Chinese-backed takeover of Lattice Semiconductor Corp. because of the importance of semiconductors to the US government and China's role in the proposed acquisition.

In the semiconductor sector, the committee - whose deliberations are secret - in 2016 recommended that then-President Barack Obama oppose a deal between the German group Aixtron and Chinese fund Grand Chip because there was a U.S. subsidiary of the German group.

Trump praised the move at the time, calling Broadcom "one of the really great, great companies". But it would have to pass regulatory muster in several countries.

That prompted a fusillade from Broadcom, with an equally accusatory response from Qualcomm.

The rival chip companies are very different in their approaches to the market, Moorhead said, comparing the tie-up to mixing "oil and water".

Qualcomm Chief Executive Officer Steve Mollenkopf has so far received the second-lowest number of votes among the combined 17 nominees from both sides, according to the data seen by Bloomberg. Broadcom has yet to announce where it will move, though its current base of operations in the U.S.is in San Jose, Calif. Qualcomm is based in San Diego.

While the suggested price of $79 per Qualcomm share - or $82 per share should Qualcomm's planned buyout of NXP Semiconductors fail - has been a constant point of argument, Qualcomm has also said in the past that regulatory hurdles are a serious challenge.


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