Published: Thu, March 08, 2018
Tech | By Dwayne Harmon

Government says Broadcom bid for Qualcomm is a national security risk

Government says Broadcom bid for Qualcomm is a national security risk

Broadcom then attempted to force a vote to install six new members on the 11-person board, who would effectively do Broadcom's bidding, but the US government intervened. “This measure will afford CFIUS the ability to investigate fully Broadcoms proposed acquisition of Qualcomm, ” the U.S. Treasury Department stated.

Qualcomm said in a statement late on March 5 that it was delaying its 2018 annual meeting to April 5 as a result of the CFIUS order.

CFIUS national-security reviews usually come after mergers are agreed.The reason it has stepped in appears to be because Broadcom has proposed six directors for Qualcomm's 11-person board. According to Guillermo Christensen, a partner at the law firm Brown Rudnick and a specialist in CFIUS-related transactions, it is unusual for the CFIUS to get involved in a transaction that has yet to be agreed to by both parties.

The investigation by CFIUS, which considers national security risks to foreign acquisitions of United States companies, came after Qualcomm filed a notice with the panel seeking a review. The government specifically cited Huawei, the Chinese telecom equipment giant, as a potential competitor that would move into the breach. A top treasury department official told senators in January that the legislation was important for protecting national security. It explained that CFIUS had conducted a national security review of the tabled offer, even though the companies are still only in talks and a long way from agreeing a deal. But according to Recode, the Trump administration isn't sure that an Asian buyer should own a big USA tech company. The agenda includes director elections that could give board control to nominees of Singapore-based Broadcom.

Broadcom sought again to soothe USA security concerns around its bid for chipmaker Qualcomm on Wednesday, saying it would stick with investments aimed at maintaining the United States' leadership in 5G technology. Broadcom has launched an unsolicited effort to acquire Qualcomm for approximately $117 billion. Theres always the possibility that Broadcom will sell off parts of Qualcomm after the acquisition.

Qualcomm had not responded to a request for comment at the time of writing.

Treasury also cited Qualcomm's contracts with United States government agencies with national security responsibilities.

Singapore-based Broadcom Ltd pledged on Wednesday to make the United States the global leader in 5G technology and maintain Qualcomm's investments in the area after any merger between the two companies.

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