Qualcomm says Broadcom knew about CFIUS investigation

Broadcom submitted its initial takeover offer the day after a White House meeting between US President Donald Trump and Broadcom CEO Hock Tan

"The Committee on Foreign Investment in the United States (CFIUS) issued an interim order to Qualcomm directing it to postpone its annual stockholders meeting and election of directors by 30 days", said the U.S. Department of the Treasury on Sunday in an official statement.

Based on a count of more than half of the votes already cast, Broadcom would win a majority of Qualcomm's board seats, according to information obtained by Bloomberg. Since Qualcomm's board of directors have rejected Broadcom's overtures, a direct appeal to shareholders is the company's last chance to see through the merger.

Broadcom is largely owned by the same United States institutional investors that own Qualcomm.

"This was a blatant, desperate act by Qualcomm to entrench its incumbent board of directors and prevent its own stockholders from voting for Broadcom's independent director nominees".

CFIUS, which conducts its reviews far from the public eye, was split on whether to review Broadcom's increasingly hostile effort to win control of its rival, Bloomberg reported last week.

An increasing number of devices rely on the semiconductors developed by companies like Qualcomm and Broadcom, with chip sales totaling more than $410 billion previous year alone.

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Once Broadcom re-domiciles " now planned for no later than May 6 " the takeover would not be a CFIUS covered transaction, Broadcom said in the statement.

Qualcomm and Broadcom are two of the biggest makers of components that are crucial to modern communications systems, including fixed-line and mobile.

Analyst Stacy Rasgon at Bernstein Research doesn't see much likelihood that the CFIUS national security review would find grounds to block a merger.

Four of the Broadcom nominees already have more than 500 million votes, with the other two each nearly 150 million ahead of the nearest Qualcomm candidates, according to the data. Broadcom had nominated a slate of directors supportive of the tie-up.

They were joined late Friday by five other members of Congress, led by Wisconsin Republican Mike Gallagher. That reincorporation is due to be completed by early May, and Broadcom has argued that its status as a soon-to-be US company means the deal should not be subject to review. In the letter, Cornyn also noted Qualcomm's significant role in the development of 5G technologies and that the United States is competing against China in this field. Once this all blows over, Qualcomm's shareholder meeting will be rescheduled to take place on or before the 6th of May.

Broadcom had not claimed that it was surprised by the CFIUS investigation, but that it had not known that Qualcomm's voluntary request was behind the probe. "It typically doesn't weigh a transaction until a deal is reached".

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