With each passing day, we seem to get a new development in Broadcom's attempt to take over Qualcomm. Yesterday, the Committee on Foreign Investment in the United States (CFIUS) asked Qualcomm to delay its annual shareholder meeting, originally scheduled for tomorrow, so it can investigate the possibility that the takeover from Singapore-based Broadcom Limited (the umbrella organization that controls Broadcom) poses a threat to national security.
This new turmoil emerges as Broadcom pushed to elect six members of its choosing to the Snapdragon maker's board of directors at the meeting. If that move is ultimately successful, sympathetic ears to Broadcom would have a majority on Qualcomm's board and could clear a path to closing the deal.
The New York Times reports that Broadcom only recently learned that Qualcomm filed a voluntary request to the CFIUS for a review of the deal back in January. Unsurprisingly, Broadcom says this is a desperate move on the part of Qualcomm to stop the takeover. For its part, Qualcomm thinks that Broadcom's accounting of events is implausible, as it claims its suitor has been in contact with the CFIUS "for weeks" and has made two "written submissions" to the body. Whether that contact would have led the CFIUS to tip off an impending investigation of the deal to Broadcom is another question.
Regardless of which side one believes, the NYT says the intervention of the US government before a takeover agreement is even reached is somewhat unusual and reflects "a charged political atmosphere in which scrutiny of takeovers of American companies by international challengers has increased drastically." In any case, Qualcomm says it will postpone its shareholder meeting and election of directors for at least 30 days so that CFIUS can carry out its investigation of Broadcom's offer.
Broadcom had sought to smooth out potential regulatory trouble like this by reincorporating and moving its headquarters to the United States, a move that's scheduled to be finished in May. According to the NYT, the company "argued that its status as a soon-to-be American company means the deal should not be subject to review."
Even after a downward re-valuation of its offer thanks to Qualcomm's pot-sweetening for its NXP Semiconductor takeover attempt, Broadcom's takeover attempt would be the largest such deal in the history of the industry if it closes. The move comes at a contentious time for Qualcomm as it navigates disputes with Apple, Intel, and Samsung on top of the NXP deal.
Most TR readers are familiar with the Qualcomm Snapdragon SoCs used in many Android smartphones and "Always Connected" Windows PCs. Broadcom makes all sorts of high-end networking gear as well as the chips inside Raspberry Pi Foundation's eponymous line of single-board computers, among many other chips.