President Trump Prohibits Broadcom from Acquiring Qualcomm
In a surprising statement late today from the White House, President Donald Trump unilaterally prohibited Broadcom’s proposed takeover of Qualcomm (NASDAQ: QCOM), the world’s biggest maker of chips for smartphones.
Citing a recommendation from a national security panel and other factors set forth under federal law, the statement also proclaims that all candidates that Broadcom (NASDAQ: AVGO) nominated for Qualcomm’s board “are hereby disqualified from standing for election.”
The two companies had yet to even agree on a price in what was widely reported to represent the biggest tech deal in history. Singapore-based Broadcom had submitted bids ranging from $103 billion to as much as $130 billion. Qualcomm’s board rejected them all, arguing that Broadcom was low-balling the value of Qualcomm’s core business and failing to take into account the complexity of the deal. Broadcom’s last offer was valued at about $117 billion.
Broadcom subsequently moved to submit its own candidates for Qualcomm’s board, and began meeting with Qualcomm’s institutional shareholders in a bid to persuade them to support a hostile takeover of the company.
While the national security panel, known as the Committee on Foreign Investment in the United States, has blocked proposed buyouts before, this was the first time the agency has moved to block a deal before an agreement had been reached. The move reflects the Trump administration’s concerns over China’s technological prowess as the world moves to 5G, the next generation standard for wireless technologies.
In issuing his order, the president cited “credible evidence that leads me to believe” that Broadcom, should it take control of Qualcomm, “might take action that threatens to impair the national security of the United States.”
The order amounts to a permanent block, declaring that any merger or takeover attempt “substantially equivalent” to the proposed deal is also prohibited.
Shares of Broadcom were marginally higher at $264.50 a share in after-hours trading. Qualcomm shares slipped by $2.71, or slightly more than 4 percent, to $60.04 a share.