The surprise move by a government panel that scrutinizes deals by foreign companies comes amid a charged political atmosphere in which scrutiny of takeovers of US companies by global challengers has increased drastically.
The Committee on Foreign Investment in the U.S. (CFIUS) directed Qualcomm to "postpone its annual stockholders meeting and election of directors by 30 days" a spokesperson for the Treasury said in a statement Sunday, to give time for CFIUS "to investigate fully Broadcom's proposed acquisition of Qualcomm". The filing means there will be investigation into the objective of the Singapore-based Broadcom's motives behind the acquisition of the US-based Qualcomm.
Broadcom's dismissive rhetoric notwithstanding, this is a very serious matter for both Qualcomm and Broadcom.
Last week, - a move that might have national security implications for the development of 5G technology in America.
The endorsement of Broadcom's nominees would represent a rejection of Qualcomm's assertion that the company would be stronger if run as a stand-alone business. "Broadcom's claims that the CFIUS inquiry was a surprise to them has no basis in fact", Qualcomm wrote.
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.More news: Shubhankar Sharma soars into lead in Mexico
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Analyst Stacy Rasgon at Bernstein Research doesn't see much likelihood that the CFIUS national security review would find grounds to block a merger.
Broadcom shareholders will vote on the proposal by May 6, after which it must be confirmed by a judge. Broadcom had nominated a slate of directors supportive of the tie-up.
Buying Qualcomm would make Broadcom the third-largest chip maker, behind Intel Corp. and Samsung Electronics Co. San Diego-based Qualcomm, fighting to stay independent, has repeatedly warned an acquisition would face regulatory scrutiny. But over the past week there has been an increasing call for CFIUS to step in as well for security reasons.
CFIUS previous year opposed the takeover of USA semiconductor manufacturer Lattice by a Chinese state group backed by a U.S. investment fund, and President Donald Trump then blocked the deal.
"Qualcomm's work is too important to our national security to let it fall into the hands of a foreign company - and in a hostile takeover no less", Cotton, a vocal Republican voice on foreign relations, said in a statement.
The Singapore-based chip maker insists that upon completion of its redomiciliation to U.S. shores by May 6, the deal will no longer be covered by CFIUS. Although Qualcomm recently signaled the companies were closing in on a deal, the companies have disagreed on a price, prompting an attempted hostile takeover.