United States President Donald Trump has blocked the $US117 billion ($150 billion) takeover of the nation's leading 5G mobile communications developer by Singapore-based technology giant Broadcom, citing national security fears.
"It appears CFIUS either found some disturbing things in its investigation or the administration sees [Qualcomm's] technology leadership in 5G and beyond as important to national security", said Moor Insights & Strategy principal analyst Patrick Moorhead in an email to Fast Company. While Qualcomm is an American company, Broadcom Limited is incorporated in Singapore, causing the deal to potentially be a national security problem.
In presidential order Mr Trump used his powers under the Defence Production Act and the International Emergency Economic Powers Act to scuttle what would have been the largest takeover deal yet in the technology sector.
Qualcomm is known for mobile chip innovations that set industry standards, for example in 5G wireless connection technology, he said.
President Trump issued a presidential order barring Broadcom from purchasing Qualcomm.
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Although Broadcom is incorporated and based in Singapore, CEO Hock Tan announced late past year while visiting Trump at the White House that the company would return its corporate headquarters to the United States, likely using San Jose as a base. At least six technology-related deals have reportedly fallen through during Trump's administration, following concerns from CFIUS.
CFIUS experts are uncertain whether the agency's authority extends to acquisitions involving two US based firms - though CFIUS has already asserted jurisdiction and launched its probe while Broadcom remains headquartered in Singapore.
The Treasury Department's letter was addressed to lawyers for Broadcom and Qualcomm, and was made public by Qualcomm. He wrote that "the Trump edict essentially kills any chances of this deal happening and is a major gut punch to those Qualcomm bulls hoping this soap opera could end with a bid following pressure from the shareholder meeting, which is poised to happen next month after getting delayed". While Broadcom's bid was active, its attempt to buy Qualcomm became the biggest soap opera on Wall Street.
Shares of Broadcom rose less than 1.0 percent to $264.10 in after hours trade while Qualcomm fell 4.3 percent to $60.14.
In contrast, he said Broadcom is adept at using intellectual property developed by others and making products at low cost, referring to them as "implementors".
Broadcom Chief Executive Hock Tan and other Broadcom representatives were scheduled to meet with CFIUS officials on Monday, according to the letter. On one hand President Trump welcomed Broadcom's decision to move their headquarters back to the states and on the other hand says, sorry, we don't trust you with Qualcomm's technology. Qualcomm said in a statement that it received the executive order.