Published: Wed, March 14, 2018
Sci-tech | By Carrie Guzman

Broadcom Will Still Redomicile to US After Ending Qualcomm Bid

Broadcom Will Still Redomicile to US After Ending Qualcomm Bid

The company said Wednesday that it had withdrawn its $117 billion offer to buy Qualcomm two days after President Trump stopped the deal, citing national security concerns.

The hostile takeover - Qualcomm had rejected Broadcom's offer - had been under investigation by the Committee on Foreign Investment in the United States, or CFIUS.

The deal would have created the world's number three semiconductor company with a leading market share in smartphones, vehicle electronics and industrial internet devices. Things went hostile a month later when Broadcom revealed it would target Qualcomm's shareholders directly and ask them to elect a new slate of directors chosen by Broadcom, and Broadcom later went on to submit a revised $121 billion bid last month. Given a wave of consolidation in the telecom-equipment industry, fewer companies are involved "and the stakes are bigger", he said.

"Reduction in Qualcomm's long-term technological competitiveness and influence in standard setting would significantly impact US national security", CFIUS warned. Redomiciling would have allowed Broadcom to evade review of the USA panel that reviews foreign deals, but a Monday order from President Donald Trump ended Broadcom's acquisition hopes.

Should that happen, Chinese companies such as Huawei, which the CFIUS has previously expressed concerns about, could take a larger, or even a dominant, role in setting 5G technology and standards and practices. He said: "This decision is based on the facts and national security sensitivities related to this particular transaction only".

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"They honestly believe they are helping to protect national security by doing this", Fleming said. Morningstar analyst Brian Colello expects Broadcom to hunt for more deals once it moves to the U.S.

The Chinese company has described the allegations as "baseless".

"Broadcom thanks the independent nominees who stood for election to the Qualcomm board, not only for their time and effort but also for their unwavering commitment to act in the best interests of Qualcomm stockholders", the company said.

Broadcom, though, had struggled to make the case for its proposed deal, with Qualcomm claiming that its bid drastically undervalued the company and, especially, the potential of its 5G mobile communications technology.

"5G is a core piece of the franchise Broadcom is trying to purchase", Bernstein analyst Stacy Rasgon wrote in a note to clients before the deal was blocked.

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