Broadcom withdraws $121b bid for Qualcomm

Qualcomm Inc 200 Day Moving Average Chart

On recommendation from the Committee on Foreign Investment in the United States, the president found there was "credible evidence" that the Singapore-incorporated Broadcom "might take action that threatens to impair the national".

With the Oval Office killing the deal, Broadcom officially cancelled its bid on Wednesday and withdrew from a proxy war to fill Qualcomm's board of directors with its roster of nominees. It added that "given well-known USA national security concerns about Huawei and other Chinese telecommunications companies, a shift to Chinese dominance in 5G would have substantial negative national security consequences for the U.S". Although the CFIUS review process is voluntary, if the parties to a transaction do not submit it for review and approval, CFIUS may initiate such a review at any time thereafter, require mitigation of the transaction, or even recommend that the president order a divestiture of the foreign person's acquired interests. The deal would make Broadcom the third-biggest maker of microchips, behind only Intel and Samsung.

Broadcom had been pursuing Qualcomm for about four months.

President Donald Trump hugs Broadcom CEO Hock Tan as Tan announces the repatriation of his company's headquarters to the United States from Singapore during a ceremony in the Oval Office of the White House on November 2, 2017.

In September 2017, President Trump issued an Executive Order blocking a Chinese investment firm, Canyon Bridge Capital Partners Inc., from acquiring Lattice Semiconductor Corporation.

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However, at the end of the day, the White House cited national security reasons in scuttling the deal, namely not wanting Qualcomm to become a foreign-owned company.

In a statement, Broadcom said it "strongly disagrees" that the acquisition raises any national-security concerns.

It's defensible if his decision was based on a reasonable suspicion Qualcomm's trailblazing research into 5G wireless technology might be transferred to Chinese tech companies that Broadcom has relationships with. The "national security" defense used to deflect the hostile takeover may turn out to be a double-edged sword.

Broadcom CEO Hock Tan had seized on Qualcomm's legal headaches in his attempt to persuade the US government to keep the deal alive.

Broadcom also tried to curry favor by moving its legal headquarters from Singapore to the U.S within the next few weeks.

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