American national security bods at the Committee on Foreign Investment in the United States (CFIUS) have asked Qualcomm to delay tomorrow's vote on Broadcom's proposed $117bn (£84.7bn) takeover.
"It would be deeply concerning if foreign parties were able to acquire control of USA companies through proxy fights for their boards without the action first going undergoing a CFIUS review", the congressman wrote, noting that such a move would encourage other foreign companies to also evade CFIUS overview through such means.
The hostile offer "provides greater value and certainty to Qualcomm stockholders, with less risk, than any other available alternative", Broadcom told shareholders.
Broadcom wants to take over Qualcomm, most recently offering $79 per share, or $117 billion in total, and putting up a slate of candidates for election to Qualcomm's board.
This new turmoil emerges as Broadcom pushed to elect six members of its choosing to the Snapdragon maker's board of directors at the meeting. The rival chipmaker accused Qualcomm of "secretly" seeking a voluntarily CFIUS review in January and failing to disclose the move to Broadcom during merger talks.
However, the pre-deal discussions by CFIUS - which are extremely rare - suggest Broadcom's plans to move its headquarters may not be enough to sidestep a national security review that could threaten the deal. Once Broadcom is a USA company, CFIUS would no longer have authority to review a proposed transaction. "Broadcom's claims that the CFIUS inquiry was a surprise to them has no basis in fact". CFIUS still has to rule on the potential acquisition, of course, but Qualcomm is probably hoping that an outcry against the takeover of state-of-the-art technology by a foreign buyer will force Broadcom to go away.
Analyst Stacy Rasgon at Bernstein Research doesn't see much likelihood that the CFIUS national security review would find grounds to block a merger.
Broadcom has urged Qualcomm shareholders to elect all six of its nominees to the board, sending "a clear signal" supporting the takeover bid which would provide a handsome gain to shareholders of the United States firm.
Broadcom's ties to China's largest telecom equipment maker, Huawei Technologies Co., has already raised concerns, although Qualcomm also works with Huawei. San Diego-based Qualcomm, fighting to stay independent, has repeatedly warned an acquisition would face regulatory scrutiny. 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.
CFIUS previous year opposed the takeover of USA semiconductor manufacturer Lattice by a Chinese state group backed by a U.S. investment fund, and President Donald Trump then blocked the deal. Unsurprisingly, Broadcom says this is a desperate move on the part of Qualcomm to stop the takeover.
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