April 25, 2018

Broadcom to redomicile in US

13 March 2018, 06:11 | Clyde Nash

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Its offer for Qualcomm has been met with resistance, not only from Qualcomm executives but also from the USA government, which has initiated a review on national security concerns.

However, the situation drastically changed after the USA government put a brake last month.

Broadcom's $117 billion offer to buy California-based Qualcomm is being reviewed by the Committee on Foreign Investment in the United States (CFIUS) for potential national security threats.

The letter, which was dated Sunday, said that Broadcom "took a series of actions in violation" of a previous order from Treasury.

The firm had previously said it will complete its redomiciliation to U.S. shores by 6 May.

In a letter sent to the boards of both Broadcom and Qualcomm, CFIUS warns the government often probes companies that it thinks may pose a risk to U.S. infrastructure.

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A successful acquisition of NXP would put pressure on Broadcom to abandon its takeover attempt of Qualcomm or return with a higher price. That would let Broadcom redomicile by April 3, ahead of Qualcomm's rescheduled shareholder meeting.

One concern reportedly raised is that Broadcom has a reputation for focusing on cost-cutting rather than investment in new technology.

For the past few months, Qualcomm has been trying to fend off Broadcom's unsolicited advances and has rejected multiple Broadcom bids, the most recent being for $121 billion, or $82 a share. This winter, Broadcom attempted a hostile takeover by urging shareholders to vote in Broadcom-friendly board members. Namely, Broadcom was supposed to inform the CFIUS five business days before making any moves to bring its headquarters back to its original home in the US.

Qualcomm, meanwhile, has accused Broadcom of "trivializing" national security. There are concerns that the takeover could decrease the competitive advantage of the the wireless technology sector. The company emphasized its roots in America but politicians aren't welcoming towards the idea of an Asian company taking over Qualcomm, which is considered an emerging leader in the 5G connectivity race. It continued its campaign to assure their reliability with another infographic Monday, noting that a majority of the board members are US citizens, as are all of the top 20 shareholders.

"Broadcom will not sell any critical national security assets to any foreign companies", the letter said.

The company said in its press release today that it supports the CFIUS process and noted that the agency has previously reviewed and cleared its acquisition of Brocade in November 2017.

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