Saturday, 18 August, 2018

Trump blocks Broadcom's takeover of Qualcomm

Stocks sink as technology rally fades Qualcomm drops Press. All rights reserved. This material may not be published broadcast rewritten or redistributed
Troy Mann | 13 March, 2018, 11:53

As it fended off Broadcom's hostile advances, Qualcomm asked shareholders to have confidence in its strategy to grow by investing in new technology and moving into new businesses.

A sign to the campus offices of chip maker Broadcom Ltd, who announced on Monday an unsolicited bid to buy peer Qualcomm Inc for $103 billion, is shown in Irvine, California, U.S., November 6, 2017.

The attempted takeover threatened Qualcomm leadership in developing the next generation of wireless technology.

"It is not just China, it is not just chips".

Trump issued an order on Monday blocking the potential merger between Singapore-based Broadcom and Qualcomm - headquartered in San Diego, Calif. - signaling yet another protectionist move for the Trump administration rapidly aligning more firmly against the globalist economic model.

A source familiar with CFIUS' thinking had said that, if the deal was completed, the United States 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". In September, Trump stopped the US$1.3b acquisition of Portland-based Lattice Semiconductor by a private equity firm that had some Chinese investment. Of those, Barack Obama blocked two deals during his two terms.

This is the first foreign acquisition Trump has blocked as president.

President Donald Trump blocked Singapore-based Broadcom Limited's planned takeover of US chip maker Qualcomm Monday after an investigation determined the foreign company "might take action that threatens to impair the national security of the United States". It's been working for more than a year to close that deal, which Qualcomm says is key to entering new, fast-growing markets.

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Under the order, the Trump administration cites concerns that a Broadcom takeover of Qualcomm could "impair the national security of the United States". It expects to complete the investigation shortly and requested Broadcom provide any additional information as soon as possible.

Mr. Trump's intervention may have thus saved Qualcomm from getting picked off in a time of weakness.

In such a scenario, Broadcom - which now works under the laws of Singapore - would have been considered as an American company and thus its proposed Dollars 117 billion would have been considered outside the preview of a federal agency - the Committee on Foreign Investment in the United States (CFIUS) that reviews foreign deal.

"There's going to be a wake-up call once this passes", said Timothy Adams, president of the Washington-based Institute of International Finance. The panel is headed by Treasury Secretary Steven Mnuchin. A broadening of the committee's mandate will raise protective barriers by expanding its authority to reject Chinese investments.

Although the particular deal is complicated by the fact that Broadcom is based in Singapore, the more important issue is actually to have companies in the USA "get stronger and stronger" rather than getting diluted by the combination of two very large companies, Krosby told CNBC.

The Wall Street Journal reported on Friday that Intel Corp's competitive concern about Broadcom's attempt to buy mobile chip rival Qualcomm had led it to consider a range of acquisitions in response, including a bid for Broadcom.

The order is the latest signal that the president is willing to take dramatic actions to put his agenda of economic nationalism into effect.

The Trump administration is concerned about the United States losing ground in 5G technology, the latest iteration of wireless technology, which is expected to greatly improve wireless networks and prove essential to the next generation of self-driving cars as well as other technologies. Underscoring the risks it saw in the deal, CFIUS intervened in the middle of a proxy fight rather than waiting for a formal purchase agreement.

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