- The government is working to delay or prevent Singapore-based Broadcom to take over U.S. chip maker Qualcomm
- Broadcom is trying to finalize a relocation to the U.S. ahead of Qualcomm’s next board meeting, but violated the government’s rules to do so
- A CFIUS investigation has “confirmed the national security concerns” related to the potential acquisition
Singapore-based tech company Broadcom Limited is speeding up plans to relocate its headquarters to the U.S. so it can acquire Qualcomm, the only semiconductor manufacturer based in America, and is running into more trouble with the government, which has verified national security concerns in an investigation.
Broadcom says that it will complete a corporate restructure, which would make it a Delaware corporation rather than a Singapore company in a process known as “redomiciliation,” by April 3, but the U.S. government is fighting the process. (RELATED: Government Investigates Hostile Takeover Of Critical Tech Company)
“Broadcom’s proposal to acquire Qualcomm has always been premised on the completion of Broadcom’s previously announced plan to redomicile,” the company said in a statement. The company is in the “final stages of redomiciling” and insists that “U.S. national security concerns are not a risk to closing, as Broadcom never plans to acquire Qualcomm before it completes redomiciliation.”
The U.S. government, which is currently conducting an investigation into the national security risks involved with Broadcom’s attempt to purchase a critical U.S. chip maker. The Committee on Foreign Investment in the United States (CFIUS) said it had “confirmed the national security concerns” in a letter from a senior official sent Sunday, which was obtained by The Daily Caller News Foundation.
The letter, sent to Qualcomm’s attorneys, says Broadcom violated CFIUS’ by not providing five-day notice on efforts to relocate in the U.S. on three different occasions. For several months, Broadcom’s plan was to complete its relocation to the U.S. by May 6. CFIUS required the notice as part of the interim order delivered March 4, days before the scheduled Qualcomm board meeting.
Had Broadcom been a U.S. company, it’s possible that it could have completed a hostile takeover of Qualcomm, based in San Jose, Calif., without CFIUS getting involved. Broadcom was set to push its own slate of six candidates into the 11-person Qualcomm board March 6, which would have given Broadcom control of the company along with stock purchases. (RELATED: Government Worries China Will Profit From Hostile Takeover Of US Company)
During a public ceremony at the White House on Nov. 2, Broadcom CEO Hock Tan announced to President Donald Trump and others that he would be moving his company to the U.S. The announcement came as CFIUS was reviewing another merger proposal: Broadcom’s bid to purchase Brocade Communications Systems.
Broadcom and Brocade had struggled to gain CFIUS’ approval for several months, and had to withdraw their application at one point in October. A few weeks after the Oval Office ceremony, Broadcom announced that it had completed the acquisition of Brocade on Nov. 17.
Broadcom announced intentions to purchase Qualcomm, but the company rejected the offers even when the total value of the deal reached $117 billion. This winter, Broadcom attempted a hostile takeover by urging shareholders to vote in Broadcom-friendly board members.
After complaints from Qualcomm and with the urging of several senators and members of Congress, CFIUS, which is made up of nine agency chiefs and managed through the Department of the Treasury, ordered Qualcomm to delay its meeting by 30 days. If Broadcom completes its corporate headquarter move, that could mean CFIUS would be unable to block the acquisition.
CFIUS’s concern with the merger includes national security issues and a fear China would be able to gain a strategic advantage in future 5G network development. The U.S. remains dominant in setting standards for 5G now, but “China would likely compete robustly to fill any void left by Qualcomm as a result of this hostile takeover,” according to a letter by Treasury deputy secretary on March 6.
ALSO WATCH: China Snubbed Obama, Gives Trump Red Carpet Treatment
Broadcom has fought back against allegations that it would diminish Qualcomm’s 5G position, or in some way endanger strategic advantage for the U.S. They put an ad in Politico’s March 8 print edition pointing out Qualcomm’s connections to China, apparently countering concerns that Broadcom is an untrustworthy company. It continued its campaign to assure their reliability with another infographic Monday, noting that a majority of the board members are U.S. citizens, as are all of the top 20 shareholders.
“Qualcomm’s work is too important to our national security to let it fall into the hands of a foreign company — and in a hostile takeover no less,” Arkansas Republican Sen. Tom Cotton said in a statement March 6.
Send tips to [email protected]
Content created by The Daily Caller News Foundation is available without charge to any eligible news publisher that can provide a large audience. For licensing opportunities of our original content, please contact [email protected].