In a rare intervention by the government, the Trump administration moved on Sunday night to stall the potential takeover of Qualcomm, the leading USA chipmaker, by Singapore-based Broadcom on national security grounds.
"The Committee on Foreign Investment in the United States 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. Treasury Department, which chairs the committee, in a statement.
"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." said Broadcom in its statement, "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".
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The unusual move late Sunday by the interagency Committee for Foreign Investment in the United States, known as CFIUS, comes as several lawmakers called for the review.
The U.S. government is now weighing in on chipset giant Qualcomm's dramatic fight against a hostile takeover by Broadcom. Pacific Time and immediately adjourned to April 5, 2018. "Broadcom's claims that the CFIUS inquiry was a surprise to them has no basis in fact".
Broadcom said on Monday that CFIUS' intervention was the result of secret moves made by Qualcomm on January 29 to seek an investigation into the offer, which Qualcomm's board has said significantly undervalues the company. Broadcom stated that it will continue its effort to acquire Qualcomm whether or not the NXP deal closes.
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Broadcom had hoped to install six friendly board members at a shareholder meeting Tuesday, which would effectively give Broadcom control and allow a vote for Qualcomm to accept Broadcom's acquisition offer.
Later on Monday, Qualcomm fired back, saying Broadcom's response was part of "its now familiar pattern of deliberately seeking to mislead shareholders and the general public by using rhetoric rather than substance to trivialize and ignore serious regulatory and national security issues".
The government stepped in to effectively delay the apparent hostile takeover of US chipmaker Qualcomm by Singapore-based Broadcom Limited that would be the largest tech merger ever.
Broadcom initiated the proxy vote in early December as part of its takeover bid, initially putting up a slate of 11 new board candidates who favored the acquisition. In the end, that approval came just weeks after Broadcom Chief Executive Officer Hock Tan announced in an Oval Office ceremony with Trump that Broadcom would bring its headquarters to the United States.
CFIUS's main responsibility is to determine the national security implications of any proposed acquisitions by a foreign party that would result in control of a U.S. business.
The deal was expected to face tough scrutiny from competition regulators.
Five other members of Congress signed the Gallagher letter on Friday that was sent to Treasury Secretary Steve Mnuchin. The company already is run from the United States, has many USA employees, and owns critical semiconductor operations and technologies, Rasgon noted. On Monday, it extended its $127.50 per share tender offer until Friday.