Broadcom had a proposed buyout of Qualcomm, but the promising deal fell off because the president did not approve of it. An official statement was released at the beginning of the week, and the president explained the reason why the deal was not approved.
National security in danger
The statement was definitely a strange one, and national security concerns were cited as one of the reasons this transaction is prohibited. The order mentioned that there is “credible evidence” that lead the president to believe that Broadcom Limited “might take action that threatens to impair the national security of the United States”. The president also included the “partners, subsidiaries, or affiliates, including Broadcom Corporation, a California corporation, and Broadcom Cayman L.P., a Cayman Islands limited partnership, and their partners, subsidiaries, or affiliates (together, the Purchaser)”.
The order then continued by prohibiting the proposed takeover of Qualcomm, and it also prohibited “any substantially equivalent merger, acquisition, or takeover, whether affected directly or indirectly”. Broadcom also had 15 other options submitted as potential candidates. These were also prohibited by the president, and the Purchaser and Qualcomm have to certify this to the Committee of Foreign Investment in the United States (CFIUS).
Broadcom was quite optimistic about the deal until the presidential order appeared. In fact, the company believed they could save things by moving the headquarters to the United States from Singapore, despite the concerns expressed by The U.S. Treasury’s Committee on Foreign Investment in the United States.
After the deal was prohibited, Broadcom released a statement that said: “Broadcom strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns.” The shares of Qualcomm were also affected by the statement released by the White House. The fell close to 5% shortly after the announcement.