Broadcom's bid for Qualcomm could threaten national security, US warns

Broadcom's bid for Qualcomm could threaten national security, US warns

As expected, Broadcom didn't take the news lying down.

The U.S. government's Committee on Foreign Investment in the United States (CFIUS) has ordered a national security review of the proposed deal, saying a takeover can lead to lower R&D spending and weaken Qualcomm's competitive position against Chinese companies.

Following the directive from CFIUS, Qualcomm has already adjourned the shareholders meeting to May from March 6. That would move the voting back to April 4th. But no, its the Committee on Foreign Investment in the United States (CFIUS) that caused the shareholder meeting to be delayed by 30 days. According to Guillermo Christensen, a partner at the law firm Brown Rudnick and a specialist in CFIUS-related transactions, it is unusual for the CFIUS to get involved in a transaction that has yet to be agreed to by both parties.

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Some of the USA government's concerns relate to risks associated with Broadcom's relationships with foreign entities, Aimen Mir, the Treasury's deputy assistant secretary for investment security, said in the letter, without identifying who those parties might be.

San Diego-based Qualcomm has emerged as one of the biggest competitors to Chinese companies, such as Huawei Technologies, vying for market share in the sector. A top treasury department official told senators in January that the legislation was important for protecting national security. It also contends that the company's plan to buy Qualcomm will no longer fall under CFIUS's review when Broadcom finishes relocating to the US.

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. Indeed, while the two companies were undergoing a heated public battle for the hearts and minds of investors, they also were engaged in an equally intense battle to make their case with the inter-agency group of regulators.

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What's at stake: US-based Qualcomm is a leader in 5G wireless tech for things like driverless cars.

"It should be clear to everyone that this is part of an unprecedented effort by Qualcomm to disenfranchise its own stockholders", said Broadcom.

Qualcomm declined to comment on Broadcom's Wednesday statement.

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"Broadcom will not only maintain the R&D resources Qualcomm devotes to 5G and innovation in future wireless standards - we will also focus R&D spend to those critical technologies that are essential to the United States".