In an unusual step, a US National Security panel that monitors foreign M&A has ordered Qualcomm to delay its March 6 shareholder meeting to give the panel more time to investigate a takeover bid by Broadcom.
As Reuters reports, the Committee on Foreign Investment in the US (CFIUS), which has the power to stop deals that could harm national security, ordered the delay after a request from GOP Senate No. 2 John Cornyn, who asked that Broadcom’s proposal be examined on national security grounds.
Representatives from CFIUS, which Reuters describes as “an opaque, interagency panel” met last month with Qualcomm officials to discuss the deal, which Qualcomm has actively resisted, even as Broadcom raised its offer to $82 a share last month. CFIUS has the power to stop foreign companies from purchasing US firms – though Broadcom recently announced it would redomicile in the US, in part to help increase the chances that the deal gets done. The company plans to complete a move of its headquarters from Singapore back to the United States by mid-May to remove a roadblock to the proposed deal, Reuters reported on Friday.
CFIUS asked Qualcomm to delay the meeting for 30 days. However, the company said last week it had no intentions of delaying the meeting, and what happens next is still unclear.
Broadcom has six nominees for Qualcomm’s board who are up for a vote at the meeting. Qualcomm had not disclosed any approach to CFIUS in meetings between the two sides over the past month.
Broadcom accused Qualcomm of masterminding the interference by the regulator, even as Qualcomm has sought to convince its shareholders that it is open to a deal, provided it’s done at the right price.
“This can only be seen as an intentional lack of disclosure – both to Broadcom and to its own stockholders,” the Singapore-based chipmaker said in a statement.
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Depending on your level of familiarity with US trade policy, it’s possible you may have heard of the US Committee on Foreign Investment in the United States – an agency that has risen in clout and stature in recent administrations – and especially so during the Trump era, as TechCrunch explained in a post published last night.
As TC explains, not only is Qualcomm the largest chip-maker in the US, it’s also the only domestic chip-maker capable of competing in the race for 5G – something the Trump administration has labeled a national security priority.
Majority Senate Whip John Cornyn is in charge of Republicans’ efforts to reform CFIUS. He reportedly asked Treasury Secretary Steven Mnuchin on Monday to order CFIUS to preemptively review the deal – something that isn’t exactly standard practice. In fact, if CFIUS were to unilaterally stop Broadcomm before a deal is struck, it would be a watershed moment for the once obscure CFIUS and signal a shift toward an ever more aggressive posture – considering that Broadcomm has already announced that it plans to redomicile in the US.
CFIUS’ interest in blocking deals for intellectual property-related reasons has, in recent years, chiefly focused on China. But CFIUS’ involvement at Cornyn’s behest shows the Trump administration is taking its promise to protect essential US IP extremely seriously.