President Trump halts Broadcom takeover of Qualcomm

From Reuters - March 12, 2018

(Reuters) - U.S. President Donald Trump on Monday blocked semiconductor maker Broadcom Ltds (AVGO.O) proposed takeover of Qualcomm Inc(QCOM.O) on grounds of national security, ending what would have been the technology industrys biggest deal ever.

The presidential order to block Singapore-based Broadcoms $117 billion bid for San Diego-based Qualcomm reflected concerns about the United States ability to set the technology standards for the next generation of mobile cell phones in the competition with Chinese companies.

San Diego-based Qualcomm has emerged as one of the biggest competitors to Chinas Huawei Technologies Co in the sector, making Qualcomm a prized asset.

Qualcomm had earlier rebuffed Broadcoms $117 billion takeover bid, which was under investigation by the U.S. Committee on Foreign Investment in the United States (CFIUS), a multi-agency panel led by the U.S. Treasury Department that reviews the national security implications of acquisitions of U.S. corporations by foreign companies.

A source familiar with CFIUS thinking had said that, if the deal was completed, the U.S. military was concerned that within 10 years,there would essentially be a dominant player in all of these technologies and thats essentially Huawei, and then the American carriers would have no choice. They would just have to buy Huawei (equipment).

In a letter to the companies on March 5, CFIUS expressed concerns that Broadcom would not be willing to fund the research needed to maintain Qualcomms strong position on so-called 5G technology, a forthcoming standard for wireless data networks, leaving the U.S. with nowhere but China to turn for such technology.

CFIUS also said that Qualcomm has a number of military contracts with the U.S. Department of Defense.

Shares of Broadcom rose less than 1.0 percent to $264.10 in after hours trade while Qualcomm fell 4.3 percent to $60.14. Neither company responded immediately to a request for comment.

The move by Trump to kill the deal comes only months after the U.S. president himself announced Broadcoms decision to move its headquarters to the United States and called itone of the really great, great companies.


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