Broadcom gives up on Qualcomm buyout after Trump veto

15 March, 2018, 05:58 | Author: Julian Harrison
  • Trump blocks Broadcom from acquiring Qualcomm

Earlier this week-and in between, um, some management shuffles-President Trump blocked Broadcom's $117 billion bid, citing national security concerns around 5G wireless technology in particular. This ends what would have been the technology industry's biggest deal ever amidst concerns that it would give China the upper hand in mobile communications.

It is uncertain whether or not this will circumvent the national security concerns and allow Broadcom to move past the executive order, however we know that for now, Qualcomm is free to proceed as normal without worrying of an impending hostile takeover.

Yesterday, the President issued an executive order prohibiting the takeover of Qualcomm by Broadcom, as well as "any substantially equivalent merger, acquisition, or takeover, whether effected directly or indirectly, is also prohibited".

A Broadcom-Qualcomm merger would create a new and powerful rival in two areas that Intel is banking on for future revenue growth: smartphone processors and data centers, according to the Journal.

"Details of the security risk are likely around 5G cellular technology [where] Qualcomm, in our view, is well ahead of foreign and domestic competitors", said Stifel analyst Kevin E. Cassidy in a report late Monday.

On Wednesday, the Singapore-based company said in a statement that it has "withdrawn and terminated its offer to acquire Qualcomm", as well as withdrawn the list of six independent director nominees for Qualcomm's 2018 Annual Meeting of Stockholders.

"In short, USA national security concerns are not a risk to closing, as Broadcom never plans to acquire Qualcomm before it completes redomiciliation". The company was hoping that their current process of moving its headquarters back to the USA would be enough to alleviate the concerns put forth by the federal government.

Qualcomm is also fighting a $1 billion suit filed against it previous year by Apple, which accuses the company of overcharging for its wireless chips and engaging in monopolistic tactics. Treasury Department further sent a letter to both, Broadcom and Qualcomm which was made public on the 12th of March.

Along with tabling the buyout offer, Broadcom will also pull back its nominations for Qualcomm's board of directors.

The decision was a huge blow to Broadcom, in the process of relocating its legal headquarters to the United States in an effort to assuage those concerns.

It now could possibly make one more offer for Qualcomm once it completes its relocation to the USA, said Zino.



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