Industry Caught Off Guard After Trump Scuttles Tech Deal

Industry Caught Off Guard After Trump Scuttles Tech Deal

The president's order Monday blocking Broadcom's $117 billion bid for Qualcomm is the latest sign of Trump's tough stance on foreign takeovers of US technology and is part of a broader move to contain China on trade.

CFIUS's decision to review Broadcom's proposed bid came just days before Qualcomm shareholders were set to vote on whether to replace six of the company's 11 directors with nominees put forward by Broadcom, a result that could have helped Broadcom achieve the takeover. The US government is anxious that Broadcom would slowdown Qualcomm's 5G R&D spending, a move that would solidify Huawei's lead and favor China.

In a letter on March 5, CFIUS said that it was investigating whether Broadcom would starve Qualcomm of research dollars that would allow it to compete and also cited the risk of Broadcom's relationship with "third party foreign entities".

It fended off antitrust concerns around the globe over its intellectual property strategies, taking the biggest share of wireless royalties in the 3G and 4G eras and getting a head start on next decade's 5G era, which promises to embed wireless connections in cars, factories, homes and cities.

"The proposed takeover of Qualcomm by the purchaser (Broadcom) is prohibited, and any substantially equivalent merger, acquisition, or takeover, whether effected directly or indirectly, is also prohibited", the presidential order released on Monday said. But unlike with its steel tariffs, the Administration's national-security concerns in this case are legitimate.


This is the fifth time a U.S. president has blocked a deal based on CFIUS objections and the second deal Mr Trump has stopped since assuming office.

Mr Trump signed an order late on Monday to halt what would have been the biggest-ever technology deal on concerns that a takeover of Qualcomm by the Singapore-based company would erode the United States' lead in mobile technology and give China the upper hand.

Meanwhile, Broadcom announced today that is has accelerated its timetable for redomiciling its organization from Singapore to the US, moving up the date from May 6 to April 3. "There may be avenues for the companies to work together in other kinds of arrangements, but anything that looks like Broadcom controls Qualcomm, especially around the 5G business, CFIUS will be alert to".

Shares of Qualcomm slid more than 4 percent in early trading Tuesday.

This item was corrected at 12:32 p.m. ET on Tues., March 13, 2018 to show that A bipartisan group of 22 House members wrote to the Committee on Foreign Investment in the U.S.in December 2016, not December of a year ago.

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