Qualcomm delays shareholder meeting after US security review order

Broadcom's bid for Qualcomm put on hold for US security review

The US government on Sunday ordered a national security review of Singapore-based Broadcom's US$117 billion (S$154 billion) bid for Qualcomm.

The government's action highlighted growing US concerns about safeguarding semiconductor technology and cast a doubt on the deal's success.

The Committee on Foreign Investment in the United States (CFIUS), which reviews deals for potential national security concerns, rarely reviews mergers before companies have clinched an agreement.

CFIUS asked Qualcomm to postpone its shareholder meeting by 30 days.

Reuters reported last week that CFIUS, overseen by the US Treasury Department, had begun looking at Broadcom's bid as pressure grew from politicians, including senior Republican Senator John Cornyn.

Qualcomm said on Monday it was delaying its annual meeting to April 5.

The semiconductor industry is locked in a race to develop chips that power so-called 5G wireless technology.

San Diego-based Qualcomm has emerged as one of the biggest competitors to Chinese companies, such as Huawei Technologies, vying for market share in the sector.

A source said if the deal was completed, the US military was concerned that within 10 years, "there would essentially be a dominant player in all of these technologies and that is essentially Huawei, and then the American carriers would have no choice. They would just have to buy Huawei (equipment)."

Additionally, US officials said members of Congress and Federal Communications Commission officials were concerned Broadcom could sell part of Qualcomm to a Chinese company.

Such a move could hurt the US effort to develop 5G wireless technology because of the small number of suppliers that build the hardware.

Part of CFIUS' current concern, which is echoed in a letter Mr Cornyn sent to Treasury Secretary Steve Mnuchin last week, could lie in the fact that Broadcom has failed to strike a deal with Qualcomm.

Instead, Broadcom has resorted to what is essentially a hostile takeover by putting forward a slate of six Broadcom nominees for Qualcomm's 11-member board.

Mr Cornyn said on Monday he was glad CFIUS decided to review the deal, noting aggression by " rivals, like China".

Broadcom has struggled to complete its proposed deal to buy Qualcomm as the latter has resisted, citing concerns including the price offered and potential antitrust hurdles.

Broadcom said CFIUS' intervention was the result of secret moves made by Qualcomm to seek an investigation into the offer. But Qualcomm said "Broadcom's claims that the CFIUS inquiry was a surprise to them has no basis in fact" and that Broadcom had been interacting with CFIUS "for weeks". - REUTERS