One of the biggest deals in tech history may be in trouble - US President Trump has issued an executive order blocking Broadcom's US$117 billion hostile takeover of Qualcomm, citing national security risks.
In an order released Monday night, President Trump said he'd been presented with "credible evidence" by CFIUS that the transaction could threaten USA security.
Broadcom has repeatedly fouled up the politics on this deal and issued clumsy, vague rebuttals to the CFIUS review.
Since January, CFIUS has blocked Ant Financial's US$1.2 billion acquisition of USA money transfer company MoneyGram International, and has urged AT&T Inc, the second-largest wireless carrier, to cut commercial ties with Chinese phone maker Huawei Technologies Co because of national security concerns.
Broadcom-which was formerly known as Avago and adopted its new name after buying the original USA -based Broadcom in 2016-is based in Singapore. Pentagon officials insisted on a review of Broadcom's proxy battle, while the U.S. treasury department had pushed back, according to people familiar with the matter. "In short, USA national security concerns are not a risk to closing, as Broadcom never plans to acquire Qualcomm before it completes redomiciliation".
CFIUS also said that Qualcomm has a number of military contracts with the US Department of Defense.
After being rebuffed Broadcom has been stacking Qualcomm's board with members friendly to the deal.
Qualcomm and Broadcom did not immediately respond to requests for comment Monday night.
While Qualcomm is the world's fourth-largest chip maker, it still found itself being stalked by the smaller, but aggressively growing Broadcom after an unsolicited bid was lobbed last November.
In a letter to the companies on March 5, CFIUS expressed concerns that Broadcom would not be willing to fund the research needed to maintain Qualcomm's strong position on so-called 5G technology, a forthcoming standard for wireless data networks, leaving the U.S. with nowhere but China to turn for such technology. After a record 2016, such investment dropped by more than a third in 2017 to US$29 billion, according to Rhodium Group. At a White House event with the CEO, Hock Tan, he called Broadcom "one of the great, great companies". In September, Trump stopped the $1.3 billion acquisition of Portland-based Lattice Semiconductor by a private equity firm that had some Chinese investment.
"Qualcomm is as integral to our US military and the NSA (National Security Agency) as it is to our Apple phones just doing civilian calls". Earlier this morning, Broadcom moved up the date when it would become an American company domiciled in DE from early May to April 3rd.
Qualcomm's shares dipped 22 cents to close at $62.81 on Monday, while Broadcom's shares gained 3.5 percent to end the day at $262.84 on the Nasdaq.