President Trump has moved to block Broadcom’s proposed takeover of Qualcomm, claiming that there is credible evidence that such a move would endanger US national security.
The executive order, released last night, abruptly ends Broadcom’s four-month attempt to buy Qualcomm, a deal that would have been the largest ever completed in the technology sector.
Announcing the move, Trump didn’t elaborate on what he described as “credible evidence” that showed that the proposed deal “threatens to impair the national security of the US”.
However, it follows on from warnings last week by the Committee on Foreign Investment in the United States (CFIUS) that a deal, if successful, could lead to China becoming dominant in the development of 5G, which “would have substantial negative security consequences for the United States”.
“While the United States remains dominant in the standards-setting space currently, China would likely compete robustly to fill any void left by Qualcomm as a result of this hostile takeover,” CFIUS added, voicing concerns that a Broadcom/Qualcomm merger could offer an advantage to China’s Huawei.
Earlier this month, in response to those fears, Broadcom announced the creation of a $1.5bn fund “to ensure US leadership in future wireless technology.” Broadcom also promised not to sell off any “critical national security assets” to foreign firms.
It’s also believed that Trump’s order follows concerns that Broadcom was not fully cooperating with an investigation into the deal by federal regulators, as a US Treasury Department letter suggests.
Trump’s order concludes: “The Purchaser and Qualcomm shall immediately and permanently abandon the proposed takeover.
“The proposed takeover of Qualcomm by the Purchaser is prohibited, and any substantially equivalent merger, acquisition, or takeover, whether effected [sic] directly or indirectly, is also prohibited.
Broadcom said it was reviewing the presidential order, noting that it “strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns.”
Qualcomm has yet to comment, but will no doubt be celebrating the news after rebuffing multiple offers from Broadcom claiming they “undervalue” the company and its “leadership position in mobile technology”.
Trump’s decision to block the merger comes amid rumours that Intel is said to be considering making a bid for Broadcom.
While the WSJ claimed that Intel was considering making a bid in order to thwart Broadcom’s now-obstructed Qualcomm takeover, the report added that chipmaker might launch a takeover bid for Broadcom regardless.
It’s also not the first technology takeover that President Trump has blocked on national security grounds. In September 2017, Trump also blocked the takeover of Lattice Semiconductor by Chinese investment group Canyon Bridge Capital Partners following a recommendation from CFIUS.
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