President Donald Trump issued an executive order on Monday blocking Broadcom Ltd. from acquiring San Diego-based Qualcomm, scuttling a $117 billion deal that had been subject to us government scrutiny on national security grounds.
The US Treasury Department told Singapore-based Broadcom it confirmed some of its national security concerns about the chipmaker's unsolicited bid to buy rival Qualcomm, in an apparent attempt to block any deal before it is signed.
Although Broadcom is incorporated and based in Singapore, CEO Hock Tan announced late past year while visiting Trump at the White House that the company would return its corporate headquarters to the United States, likely using San Jose as a base.
"There is credible evidence that leads me to believe that Broadcom ... through exercising control of Qualcomm ... might take action that threatens to impair the national security of the United States", the order reads.
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 US "get stronger and stronger" rather than getting diluted by the combination of two very large companies, Krosby told CNBC.
The President's order does not go into detail about the national security concerns he and the CFIUS have with the potential deal.
The Singapore-based company has voiced the intention to move its headquarters to the U.S.to ease concerns over the proposed takeover.
In the letter, a Treasury official said CFIUS accelerated its investigation into the bid in light of Broadcom's violations of the panel's earlier order. "The transfer of Qualcomm's technology innovations includes its strides toward 5G to a foreign company posed a real danger to national security", American for Limited Government President Rick Manning said in a statement.
CFIUS also said that Qualcomm has a number of military contracts with the US Department of Defense.
So far, CFIUS said its probe confirms the national security risks of the Broadcom-Qualcomm deal.
Qualcomm and Broadcom did not immediately respond to requests for comment Monday night. On April 5th, Qualcomm stockholders were to vote on their company's 11-seat Board of Directors.
Broadcom's move to takeover Qualcomm just hit a permanent setback: President Trump has blocked the business plan, citing national security concerns.
If Qualcomm's "technological leadership" diminishes, Mir said in his March 5 letter, Chinese tech companies stand to gain in the race to develop 5G. The company must stop the acquisition together with Broadcom and provide written proof of this once the step has been taken.
Last September, Trump stopped the takeover of the American chip maker Lattice Semiconductors by Canyon Bridge Capital Partners, a private equity firm with ties to China. Microsoft and Google perceive an independent Qualcomm as being more closely aligned with their interests than a Broadcom-owned Qualcomm that is in bed with Apple. Jack Ma's pledge to create 1 million U.S.jobs didn't help his Ant Financial's attempted takeover of MoneyGram International Inc., which collapsed amid CFIUS opposition. While Intel is "eager for Broadcom to fail", it could make a play for the company if the merger gained momentum, the Journal said in another report on Friday.
Qualcomm's shares dipped 22 cents to close at $62.81 on Monday, while Broadcom's shares gained 3.5 percent to end the day at $262.84 on the Nasdaq.