The government's national security merger review body, called the Committee on Foreign Investment in the US, asked Qualcomm to delay its scheduled shareholder elections this week so the committee could continue reviewing the possible merger.
The ugly rhetorical war between semiconductor companies Broadcom and Qualcomm got even uglier on Monday.
Qualcomm's shareholder meeting was set to include a vote on whether to replace six of its 11 directors with nominees put forward by Broadcom. But a half-dozen lawmakers called for a review of Broadcom's $79-per-share, roughly $117 billion hostile takeover bid, including Republican Rep. Mike Gallagher of Wisconsin, who said a Broadcom takeover would give a foreign company "visibility into the sensitive work that Qualcomm performs on behalf of the USA government".
Separately, Broadcom said the decision was the result of secret moves made by Qualcomm on January 29 to encourage an investigation into the proposed $117 billion (roughly Rs. 7.6 lakh crores) buyout offer.
In 2011 Chinese smartphone maker Huawei was forced to unwind a $2 million offer to acquire the assets of a failed US company, 3Leaf Systems, when CFIUS determined that 3Leaf's technology could be used in ways that were not in the best interests of the United States. "It is critical that Qualcomm stockholders know that Qualcomm did not once mention submitting a voluntary notice to CFIUS in any of its interactions with Broadcom to date". This brings Qualcomm's "engagement theater" to a new low. Qualcomm said in a statement today that it would comply with that request and push back the shareholder meeting by at least 30 days.
Qualcomm reacted with its own statement, saying that Broadcom had already filed documents with CFIUS twice in the past several weeks and should not be surprised about the order.
Previously, Broadcom has said it would walk away from its $79 per share offer to acquire Qualcomm should the annual meeting be delayed past March 6.
Buying Qualcomm would make Broadcom the third-largest chip maker, behind Intel Corp. and Samsung Electronics Co. Any Broadcom candidates elected would be required to act in the best interest of Qualcomm and its shareholders.
In a February 26 letter to Treasury Secretary Steve Mnuchin, Rep. John Cornyn, R-Texas, the second-ranking Republican in the House of Representatives, asked Mnuchin to have CFIUS get involved given not only that a China-based company was trying to buy an American entity, but that it was doing so through a hostile takeover.