Qualcomm AGM delayed as United States investigates security concerns at Broadcom

Reuters

US regulators have asked giant chipmaker Qualcomm to delay an annual shareholder meeting to give them more time to investigate whether a takeover bid by Broadcom, a Singapore company that is in the process of moving to San Jose, would threaten USA national security.

Qualcomm shareholders were due to meet Tuesday, but Broadcom said it was informed Sunday night that Qualcomm filed a voluntary request on January 29 for United States regulators to investigate the deal, and was ordered to postpone the meeting for 30 days.

Broadcom's courtship of Qualcomm just got a bit more interesting.

Broadcom had already reacted negatively to CFIUS taking an interest in the deal and appears to be throwing its metaphorical toys out of its pram at this latest development.

Qualcomm's request put the national security issue in play and that appealed to some CFIUS members, according to a report in The Wall Street Journal.

The Qualcomm statement said CFIUS is an independent governmental body charged with protecting USA national security and "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".

Qualcomm says Broadcom has interacted with CFIUS for weeks, including two written submissions.

Broadcom is largely owned by the same United States institutional investors that own Qualcomm. First, Broadcom offered Qualcomm a takeover deal worth $103 billion.

Broadcom slammed Qualcomm's decision to "secretly" file a voluntary request with CFIUS to start an investigation, labeling it a "blatant, desperate act" to entrench its incumbent board of directors.

US President Donald Trump jokes with Broadcom CEO Hock Tan as he announces that Broadcom woud be moving back to the US in the Oval Office at the White House in Washington, DC, on November 2, 2017.

The effect of the order is to delay a vote of Qualcomm shareholders on a slate of six Broadcom-nominated candidates to serve on Qualcomm's board of directors.

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

CFIUS believes this deal might hurt United States national security interests.

Broadcom is pursuing a hostile takeover of Qualcomm, which would be the largest technology deal in history, creating a giant chip maker whose products would be in the majority of the world's smartphones. The company already is run from the United States, has many USA employees, and owns critical semiconductor operations and technologies, Rasgon noted. Broadcom "expects to complete its redomiciliation process to the U.S.by May 6, at which point the proposed acquisition will not be a CFIUS covered transaction", Zino wrote in a report on Monday. Getting NXP into the fold would increase Qualcomm's presence in such areas as 5G, the internet of things and autonomous vehicles.

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