United States regulators ask Qualcomm to delay shareholder meeting

Qualcomm building is shown in San Diego California U.S. Mike B  REU

Qualcomm Inc. postponed a key investor vote in the hostile takeover battle with rival chipmaker Broadcom Ltd., after the powerful Committee on Foreign Investment in the US started investigating the proposed combination and ordered a delay. Even if the company's slate of 11 directors were to be re-elected, once Broadcom became a USA company Qualcomm would have lost the CFIUS arrow in its quiver.

Reuters had reported last week that the panel, which can stop mergers that could harm USA security, had begun looking at Broadcom's bid, after pressure from politicians including senior Republican Senator John Cornyn.

The government panel, the Committee on Foreign Investment in the United States, scrutinizes deals for national security concerns. Broadcom began a hostile bid for Qualcomm late past year, and has largely been rebuffed for its advances.

At the now-postponed meeting, Qualcomm shareholders were going to vote whether to replace six Qualcomm board directors with Broadcom-nominated candidates, a move that could accelerate the acquisition if those candidates were elected and took a majority position on the board.




The crux of attention was then centered on Qualcomm's annual shareholders meeting where votes would be tallied for the board election. "A disruption of Qualcomm's R & D efforts would in effect hand the growing competition for 5G to China". "This can only be seen as an intentional lack of disclosure - both to Broadcom and to its own stockholders". Broadcom has been interacting with CFIUS for weeks and made two written submissions to CFIUS. But CFIUS-which includes officials from the Defense, Energy, Homeland Security, and Justice departments-is taking more time to review the bid to determine whether a foreign acquisition of Qualcomm constitutes a national security threat.

Five other members of Congress signed the Gallagher letter on Friday that was sent to Treasury Secretary Steve Mnuchin. That reincorporation is due to be completed by early May, and Broadcom has argued that its status as a soon-to-be USA company means the deal should not be subject to review.

Cornyn said Qualcomm is the leading USA company in driving 5G development, and an acquisition by Broadcom could stall that and hand the leadership of 5G R&D to Huawei, a Chinese tech firm. But it now appears willing to continue to pursue its bid for Qualcomm through the CFIUS review, said Bernstein Research Analyst Stacy Rasgon in a research note. CFIUS still has to rule on the potential acquisition, of course, but Qualcomm is probably hoping that an outcry against the takeover of state-of-the-art technology by a foreign buyer will force Broadcom to go away.

The two companies are locked in a battle over the future of Qualcomm, whose board and management say Broadcom's offer is a gambit to steal the company on the cheap.

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