Monday, 24 September, 2018

Tech's biggest takeover could be blocked by the USA government

Qualcomm takeover bid halted by US government Tech's biggest takeover could be blocked by the US government
| 07 March, 2018, 00:27

On Sunday it asked Qualcomm to delay its shareholder meeting, which was to have been held Tuesday.

Sen. Tom CottonThomas (Tom) Bryant CottonGOP looks for Plan B after failure of immigration measures Senate rejects Trump immigration plan Our intelligence chiefs just want to tell the truth about national security MORE (R-Ark.), who has urged a crackdown on Huawei's forays into the USA market, praised the CFIUS intervention on Monday.

A view of the US Treasury building, seen in Washington, DC on June 21, 2017. It raised the possibility that a takeover would weaken Qualcomm's leadership position in mobile technology and 5G, opening the door to competition from Chinese companies such as Huawei.

Qualcomm stated on 5 March that "Broadcom's claims that the CFIUS inquiry was a surprise to them has no basis in fact".

Qualcomm is one of the leading players in the build-up to 5G networks (in partnership with Nokia), Huawei is the main competitor.

A source familiar with CFIUS' thinking told Reuters on Monday that if the deal was completed, the USA military was concerned that within 10 years, "there would essentially be a dominant player in all of these technologies and that's essentially Huawei". First, Broadcom offered Qualcomm a takeover deal worth $103 billion. Such a move could hurt the USA effort to develop 5G wireless technology because of the small existing number of suppliers that build the hardware. Still, the deal cant go on without an okay from CFIUS (and later other regulatory bodies will get involved too).

A source familiar with CFIUS' thinking told Reuters on Monday that if Broadcom acquired Qualcomm, the USA military had concerns that within 10 years "there would essentially be a dominant player in all of these technologies and that's essentially Huawei". Ordinarily, it only weighs in after a deal is agreed upon - and can recommend that the president block any deal it considers a threat.


Cornyn said on March 5 he was glad CFIUS had made a decision to review the deal, noting that "some of our worldwide rivals, like China, have been incredibly aggressive and strategic".

Broadcom has struggled to complete its proposed deal to buy Qualcomm as the latter has resisted, citing several concerns including the price offered and potential antitrust hurdles.

Qualcomm pushed CFIUS to intervene in hopes of quashing the hostile takeover.

Qualcomm took a deep breath, counted to three and responded to Broadcom's weekend broadside before postponing its stockholder meeting by a month. Broadcom is based in Singapore.

The government's move though could now spoil Broadcom's efforts to take over the American company.

In Monday's letter, the panel said that it was concerned that Broadcom, which is in the process of moving its headquarters to the US, would shift Qualcomm's focus from R&D to short-term profit-generating operations, thereby threatening the company's innovations.

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