The Wall Street Journal reported on March 5 (local time) that the U.S. government put a brake on Broadcom’s attempt to acquire Qualcomm, which was expected to become the largest M&A deal in the global semiconductor industry.
The Committee on Foreign Investment in the United States (CFIUS) recently ordered Qualcomm to postpone its shareholders’ meeting scheduled for March 6 by a month. Broadcom, a Singaporean semiconductor company, was planning to acquire Qualcomm by appointing six new board members at the meeting. However, Broadcom’s attempt for the hostile M&A ran into a brick wall.
Unprecedented Intervention of U.S. Government
The United States Department of the Treasury said that the CFIUS now can look into Broadcom’s acquisition plan in depth. This means the U.S. government is going to look into whether Broadcom’s acquisition of Qualcomm can threaten the national security of the U.S.
The investigation does not stop negotiations for the acquisition. Still, an investigation prior to the completion of M&A negotiations is unprecedented. The Financial Times reported that the order implies how worried the U.S. government is about the attempt.
Broadcom criticized the CFIUS for its decision. “It is a blatant act of Qualcomm to maintain the current board of directors,” it said. Qualcomm said in response that Broadcom misinterpreted the public’s and investors’ mind while ignoring national security issues and regulatory matters.
Concerned over Possibility of Technology Leakage
It seems the U.S. government is concerned over the possibility that Chinese companies can obtain the 5G technology of the U.S. as a result of Broadcom’s acquisition of Qualcomm.
At present, Qualcomm, the largest 4G chipset manufacturer in the world, is competing with Chinese companies like Huawei over 5G chipset development. According to the Financial Times, Broadcom, which was a U.S. company before acquisition by Singapore’s Avago Technologies, has cooperated with Huawei for long and U.S. politicians are concerned about this fact.
These days, the U.S. government is keeping Chinese companies at bay while mentioning national security. Early this year, the CFIUS blocked Alibaba’s Ant Financial from acquiring American money transfer company MoneyGram. Likewise, Huawei had to give up its plan to enter the U.S. smartphone market with AT&T. Besides, the U.S. Congress is planning to give more power to the CFIUS.
Broadcom, which is the fourth-largest company in the global semiconductor industry, tried to take over Qualcomm, the third-largest, for more than four months. The first acquisition price proposed by Broadcom had been US$105 billion, but it was raised to US$117 billion. Qualcomm, however, said on February 26 that it would accept Broadcom’s proposal only after the price is raised to US$160 billion.