President Donald Trump issued an executive order Monday blocking Broadcom Ltd. from acquiring Qualcomm Inc., scuttling a $117 billion hostile takeover that had been subject of scrutiny over the deal's threat to U.S. national security.
Trump acted on a recommendation by the Committee on Foreign Investment in the U.S., which reviews acquisitions of American firms by foreign investors. The decision to block the deal was unveiled just hours after Hock Tan, the chief executive officer of Singapore-based Broadcom, met with officials at the Pentagon in a last-ditch effort to salvage the transaction.
"There is credible evidence that leads me to believe that Broadcom Ltd." by acquiring Qualcomm "might take action that threatens to impair the national security of the United States," Trump said in the order released late Monday in Washington.
Tan met earlier Monday with committee officials to make its case to be allowed to pursue an acquisition of Qualcomm. But those talks failed to change the regulator's belief that the takeover posed a potential national security risk.
In a letter to both Qualcomm and Broadcom dated Sunday, the Committee for Foreign Investment accused Broadcom on three separate occasions of failing to provide five business days' notice of its efforts to accelerate relocation of its headquarters to the U.S.
The multiagency regulator said Broadcom's moves to relocate to the U.S. earlier than expected serve to shorten the committee's time to investigate.
So far, the Committee on Foreign Investment said its probe confirms the national security risks of the Broadcom-Qualcomm deal. It expects to complete the investigation shortly and requested Broadcom provide any additional information as soon as possible.
"In the absence of information that changes [the committee's] assessment of the national security risks posed by this transaction, [the committee] would consider taking further action, including but not limited to referring the transaction to the President for decision," the letter said.
In a statement, Broadcom denied that it violated notice requirements.
"Given Broadcom's public disclosures about the re-domiciliation process since last November, as well as its direct communications to [the committee], Broadcom has been fully transparent with [the committee] about the re-domiciliation process and believes it is in full compliance," the company said.
Monday's presidential order underscores the tough stance the Trump administration is taking on foreign takeovers of U.S. technology firms.
In September, the president blocked the sale of Lattice Semiconductor Corp. to a Chinese-backed investor. That was just the fourth time in a quarter-century that a U.S. president stopped a foreign takeover of an American firm on national security grounds. At least a half-dozen technology deals have collapsed during the Trump administration in the face of concerns raised by Committee on Foreign Investment.
The Treasury Department, which leads the Committee on Foreign Investment, had said the Qualcomm deal raised red flags because it threatened Qualcomm's leadership in developing the next generation of wireless technology.
The government also said it feared Broadcom would cut investment in research and development in order to increase short-term profits. That could allow Chinese companies to become the dominant supplier, the U.S. said.
Trump's order came as Broadcom was in the midst of moving its headquarters from Singapore to the U.S. It was seeking to gain majority control of San Diego-based Qualcomm's board to advance its hostile takeover. The Committee on Foreign Investment in the U.S. ordered the shareholder vote be postponed to investigate the transaction.
Information for this article was contributed by David McLaughlin of Bloomberg News and Mike Freeman of The San Diego Union-Tribune.
Business on 03/13/2018
Print Headline: Merger of chip makers blocked