Broadcom’s proposed $117bn Qualcomm takeover bid halted by Donald Trump
US President Donald Trump has issued an order prohibiting Singapore chipmaker Broadcom from a proposed takeover of Qualcomm on grounds of national security.
The decision abruptly ends Broadcom’s four-month, $117bn (£84.2bn) bid to buy Qualcomm - a deal that would have been the largest ever completed in the technology industry.
The deal is currently under investigation by the Committee on Foreign Investment in the United States, a multi-agency panel led by the Treasury Department that reviews national security implications when foreign entities take over US corporations.
A White House official said that concerns about the deal relate to the risks associated with “Broadcom’s relationship with third party foreign entities”.
In a statement, Broadcom said it “strongly disagrees” that the acquisition raises any national-security concerns.
Trump’s order gives Broadcom few options other than to drop its bid, said Macquarie Securities analyst Srinivas Pajjuri.
Broadcom faced challenges almost from the start of its quest. Qualcomm quickly spurned its unsolicited suitor and continued to resist even after Broadcom raised its original offer.
Broadcom’s Singapore connections complicated matters, even though the company maintained its physical headquarters in Silicon Valley and virtually all of its shareholders are in the US.
The Trump administration nevertheless balked at the prospect of a prominent US chipmaker being owned by a foreign company, particularly at a time countries around the world are gearing up to build ultra-fast 5G mobile networks that could tip the balance of power in technology.
Although its name is not widely known outside the technology industry, Qualcomm is one of the world’s leading makers of the processors that power many smartphones and other mobile devices. Qualcomm also owns patents on key pieces of mobile technology that Apple and other manufacturers rely upon in their products.
Qualcomm is fending off allegations in complaints filed by Apple and government regulators around the world that it has abused the power of its mobile patents to throttle competition and charge excessive royalties for its technology.
Broadcom chief executive Hock Tan had seized on Qualcomm’s legal headaches in his attempt to persuade the US government to keep the deal alive.
“Qualcomm faces a number of challenges that hamper its role in developing 5G,” Tan wrote in a letter sent to US Congress last week. Unlike Qualcomm, Tan said, Broadcom financed its innovation through “lawful practices”.
Trump decided to squelch Broadcom’s bid on the recommendation of the Committee on Foreign Investment in the United States, which reviews foreign purchases of US entities.
The decision didn’t come as a surprise. Earlier this month, the committee branded the proposed deal a potential security risk that could hobble the US’s ability to make the smooth and quick transition to 5G.
Now that Broadcom has been shoved aside, Qualcomm will be under pressure to prevent its stock price from sinking while trying to complete its own proposed takeover - a proposed $43bn purchase of NXP Semiconductors.