Qualcomm AGM delayed as USA investigates security concerns at Broadcom

Kelley Robertson
March 6, 2018

From Broadcom's point of view, the CFIUS order is exactly the result Qualcomm wanted.

Broadcom has been trying for months to take over Qualcomm in a blockbuster $95 billion deal that would massively consolidate the semiconductor market.

A USA national security panel on Sunday ordered Qualcomm to put off its March 6 annual shareholder meeting, delaying a long-awaited showdown in the company's attempt to see off a takeover bid by Broadcom. First, Broadcom offered Qualcomm a takeover deal worth $103 billion. Broadcom has nominated six people to serve on Qualcomm's 11-member board of directors. For now, investors appear to be endorsing Broadcom Chief Executive Officer Hock Tan's vision for the company, though he's not seeking a board seat for himself. This derails, temporarily at least, Broadcom's acquisition ambitions. "This can only be seen as an intentional lack of disclosure, both to Broadcom and to its own stockholders". That indicates that he would lose his seat. Also, Broadcom state its board and senior management are mostly American.

"Qualcomm now has their excuse to postpone their critical vote, giving them some breathing room to work on NXPI, attempt to make progress on their Apple licensing issues, and attempt to build a stronger case for shareholders", said Bernstein analyst Stacy Rasgon. Broadcom then reduced its offer for Qualcomm to $79 a share. T. Rowe's vote and stance could change in the run-up to a meeting, said the person who declined to be identified because the voting is not yet public. Once that happens, which is expected in early to mid-May, the redomiciling can happen quickly, according to a source familiar with the matter. The vote on that slate is set for Tuesday.

On Monday, Broadcom said that it had been informed Sunday night that Qualcomm had filed a voluntary request for a Cfius review in January. Broadcom has been interacting with CFIUS for weeks and made two written submissions, Qualcomm said.

The merger of the two chipmakers would be the biggest technology deal in history.

The order for a delay by the government panel is unusual, since CFIUS doesn't usually investigate before a merger is agreed.

Broadcom is now based in Singapore, but expects to move its headquarters to the U.S.no later than May 6, the company said.

U.S. Sen. John Cornyn, a Texas Republican, as well as San Diego-area Congressmen Scott Peters, a Democrat, and Duncan Hunter, a Republican, sent letters to Trump Administration officials requesting a CFIUS review.

Broadcom has argued that CFIUS' concern is unwarranted since it does not control the directors that it proposed. Once this all blows over, Qualcomm's shareholder meeting will be rescheduled to take place on or before the 6th of May.

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