U.S. national security officials are threatening to recommend that President Donald Trump block Broadcom Ltd.’s proposed takeover of rival chipmaker Qualcomm Inc., according to a Treasury Department letter made public on March 12.
An investigation of the deal by the Committee on Foreign Investment in the U.S. (CFIUS), which reviews purchases of American firms by foreign investors, has confirmed national security threats related to the Qualcomm acquisition by Singapore-based Broadcom, Treasury said in the letter.
"In the absence of information that changes CFIUS’s assessment of the national security risks posed by this transaction, CFIUS would consider taking further action, including but not limited to referring the transaction to the president for a decision," Treasury said. Only the president can block a foreign takeover on national security grounds.
The letter appears to dim Broadcom’s chances of moving ahead with its $117 billion takeover of Qualcomm. CFIUS, which is led by Treasury, has ordered Broadcom to submit information to the panel by noon Monday ahead of a meeting between CFIUS officials and Broadcom Chief Executive Officer Hock Tan, its general counsel, and chief technology officer, according to the letter.
CFIUS on March 4 ordered Qualcomm to postpone a shareholder meeting to vote on Broadcom’s nominees to Qualcomm’s board. Broadcom aimed to win control of the board so it could advance with its hostile takeover. Treasury said Broadcom violated that order by not giving proper notice about moving its headquarters to the U.S.
Broadcom said on March 12 that it has been "fully transparent" with CFIUS and is in "full compliance" with the March 4 order. The company, which announced its plan to move to the U.S. last year, said it is "in all important respects a U.S. company" and has previously won approval from CFIUS for acquisitions of American businesses.
"U.S. national security concerns are not a risk to closing, as Broadcom never plans to acquire Qualcomm before it completes redomiciliation," it said.
The national security panel told Qualcomm in a March 5 letter the sale to Broadcom could hurt the chipmaker’s competitiveness by reducing research and development, which would threaten U.S. security.
By David McLaughlin
