Published: Tue, March 13, 2018
Business | By Max Garcia

Trump blocks high-tech takeover bid

Trump blocks high-tech takeover bid

Donald Trump took the unusual step of blocking the Singaporean chip maker Broadcom's bid for its U.S. rival Qualcomm on Monday night, citing national security concerns and ending what would have been the biggest-ever tech deal.

In his presidential order, Trump cited "credible evidence" that the takeover "threatens to impair the national security of the United States".

Trump's order came shortly after the Committee on Foreign Investment in the United States (CFIUS) said in a letter to both companies that the deal posed national security concerns. The company's physical headquarters is already in San Jose, Calif. - about 450 miles from Qualcomm's headquarters in San Diego.

The company first announced its relocations plans in November in a White House ceremony with President Trump. Since the deal was announced, Qualcomm's shares never broke $67.

Broadcom, co-founded by Henry Samueli and Henry Nicholas III, was long based in Irvine before it was bought by Singapore-based Avago Technologies in 2015.

In an effort to alleviate these concerns, Broadcom has been rushing to redomicile (legally move the company) to the United States.

He also noted that Department of Defense programs rely on access to Qualcomm products. The stock ended last trade at 28.25 a share and the price is up more than 10.09% so far this year.

"It is not out of the realm of possibility, but I view it as now that CFIUS has got a hook in, Broadcom specifically may be stuck with this process", said Fleming. It's since tried to stack Qualcomm's board with friendly members.

US President Donald Trump's shut down of Broadcom Limited's attempted takeover of chip maker Qualcomm Inc puts a cloud over potential deals for US assets by foreign companies with Chinese connections.

In a letter to the companies on March 5, CFIUS expressed concerns that Broadcom would not be willing to fund the research needed to maintain Qualcomm's strong position on so-called 5G technology, a forthcoming standard for wireless data networks, leaving the U.S. with nowhere but China to turn for such technology. "China has a finely honed capability to access the technology of companies such as Broadcom, along with that of their subsidiaries and acquisitions", he said.

"A shift to Chinese dominance in 5G would have substantial negative national security consequences for the United States", CFIUS said."While the United States remains dominant in the standards-setting space now, China would likely compete robustly to fill any void left by Qualcomm as a result of this hostile takeover".

Chinese companies such as Huawei Technologies have been investing heavily in research and would be able to step into any void created by a weakened Qualcomm. Qualcomm is now involved in intense litigation with Apple around patents and accusations of anti-competitive behaviour. "This was a blatant, desperate act by Qualcomm to entrench its incumbent board of directors and prevent its own stockholders from voting for Broadcom's independent director nominees", Broadcom said in the statement a week ago.

Shares of Broadcom rose more than 3.5 percent on Monday while Qualcomm's stock edged lower.

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