Published: Tue, March 06, 2018
Markets | By Erika Turner

Broadcom faces new hurdle as CFIUS probes Qualcomm takeover bid

Broadcom faces new hurdle as CFIUS probes Qualcomm takeover bid

Qualcomm (QCOM) has delayed its annual shareholders meeting, which had been set for Tuesday, after asking the Committee on Foreign Investment in the investigate Broadcom's (AVGO) attempted purchase of Qualcomm.

Qualcomm's shareholder vote will now be delayed at least a month as the Committee on Foreign Investment in the USA investigates Broadcom's proposed deal.

The order adds to signs that Broadcom's promise to move its official base back to the United States before it completes the proposed $117 billion takeover may not be enough for US officials at a time when worldwide trade tensions are rising. That reincorporation is due to be completed by early May, and Broadcom has argued that its status as a soon-to-be US company means the deal should not be subject to review.

Broadcom's six nominees for Qualcomm's board are up for a vote at the meeting, and if they are all elected they would represent a majority of the 11-member board.

Broadcom is incorporated and now based in Singapore, but CEO Hock Tan announced late previous year while visiting President Donald Trump at the White House that the company would return its corporate headquarters to the USA, likely using San Jose as a base.

Trump praised the move at the time, calling Broadcom "one of the really great, great companies".

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As the request was made 48 hours before Qualcomm's Annual Meeting was due to take place, Broadcom suspects that the move was a means to delay a vote which could see Qualcomm board members replaced - and change the rules of the game when it came to a potential merger.

Qualcomm went on to challenge an assertion that wasn't exactly what Broadcom had asserted. Broadcom's investors (and Wall Street!) are favorable towards the deal, but Qualcomm itself has been fighting hard against the takeover.

Qualcomm did not mention submitting a voluntary notice to CFIUS in any of its interactions with Broadcom.

CFIUS has imposed an order to investigate the proposed acquisition and delay the meeting for 30 days, according to an emailed statement Monday.

Qualcomm officials have rejected Broadcom's acquisition offers, saying that even an increased bid of $121 billion-which was reduced late last month after Qualcomm increased its own offer for chip maker NXP to $44 billion-was too low; that Qualcomm was well-positioned in such growth areas as 5G networking, data centers and artificial intelligence (AI); and that regulatory issues could pose a problem.

Qualcomm's shares fell 2 percent in trading before the bell. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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