Tech's biggest takeover could be blocked by the United States government


Broadcom then attempted to force a vote to install six new members on the 11-person board, who would effectively do Broadcom's bidding, but the USA government intervened. The meeting was slated for Tuesday, but it was delayed earlier in the week at the request of the Committee on Foreign Investment in the US (CFIUS), due to the security issues surrounding the potential deal. That would move the voting back to April 4th.

"CFIUS has determined that there are national security risks to the United States as a result of and in connection with the transaction proposed by Broadcom", it said.

The letter lays out a case that, in part, points to concerns about China as well as risks associated with "Broadcom's relationships with [unnamed] third-party foreign entities". The department pointed to the Chinese company Huawei Technologies as a potential threat; Huawei has a growing 5G patent portfolio and could pave the way for Chinese government control over the sector, it claimed.

Ultimately, the CFIUS will look at the deal from a national security standpoint.

Broadcom pledged on Wednesday to keep the United States at the forefront of emerging mobile technology if it were to acquire Qualcomm, the chip maker's latest effort to allay the Trump administration's national security concerns about its hostile takeover bid.

In January, Chinese firm Ant Financial canceled its bid to acquire USA money transfer company MoneyGram, after CFIUS rejected the deal, citing concerns over the safety of data that can be used to identify US citizens. Broadcom, however, is based in Singapore and is in the process of reincorporating in the US.

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The letter also cited Broadcom's unspecified plans for changing Qualcomm's licensing practices that have come under fire from regulators around the world as well as Apple, one of Qualcomm's largest customers.

While a CFIUS review in the middle of a takeover fight is unusual, any foreign purchase of Qualcomm would draw scrutiny from the panel because it is a key semiconductor manufacturer, said Jason Waite, an attorney at Alston & Bird in Washington.

In a statement, Broadcom responded: "There can be no question that an American Broadcom-Qualcomm combination will provide far more resources for investments and development to that end".

Treasury also cited Qualcomm's contracts with USA government agencies with national security responsibilities.

A source familiar with CFIUS' thinking said that if the deal was completed, the US military was concerned that within 10 years, "there would essentially be a dominant player in all of these technologies and that's essentially Huawei, and then the American carriers would have no choice".

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