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.
Trump's order states that there is "credible evidence" that a Broadcom-led Qualcomm "might take action that threatens to impair the national security of the United States".
The move is little surprise, since the U.S. Treasury's Committee on Foreign Investment in the United States, or CFIUS, had already raised concerns in a letter sent March 5 to both companies' attorneys. However as Broadcom has already been going through great lengths to acquire the company, including planning to redomicile to the United States so that the acquisition was no longer a foreign deal, it might yet prove too early to rule them out entirely.
Huawei has been forging closer commercial ties with big telecom operators across Europe and Asia, putting it in prime position to lead the global race for 5G networks despite US concerns.
The attempted takeover threatened Qualcomm leadership in developing the next generation of wireless technology. The order also said Broadcom's proposed new slate of candidates for Qualcomm's board can not stand for election. It expects to complete the investigation shortly and requested Broadcom provide any additional information as soon as possible.
Broadcom is headquartered in Singapore, but has a significant business presence and offices in the United States.
President Donald Trump announced today that he is blocking Singapore-based Broadcom's takeover of USA chipmaker Qualcomm on national security grounds.
Trump's order prohibits Broadcom's proposed takeover of Qualcomm as well as "any substantially equivalent merger, acquisition, or takeover, whether effected directly or indirectly".
Broadcom attempted a hostile takeover by purchasing proxy votes to install six friendly board members on Qualcomm's 11-member board when Qualcom rejected the offers.
That was just the fourth time in a quarter century that a USA president stopped a foreign takeover of an American firm on national security grounds.
"In the absence of information that changes CFIUS's assessment of the national security risks posed by this transaction, CFIUS would consider taking further action, including but not limited to referring the transaction to the President for decision", the letter said.
CFIUS already said it was anxious that Broadcom, which is known to focus on cost-cutting, would stymie research and development at San Diego-based Qualcomm, and weaken it against foreign rivals racing to develop next-generation wireless technology, such as China's Huawei Technologies.
Trump hosted Broadcom CEO Hock E. Tan in the White House a year ago when the executive announced the proposed move.
The president's decision to kill the deal was immediately won the president praise from the right. In its previous response to the CFIUS injuction, the company said "Broadcom has a successful 50-year heritage of building leading communications technologies including Wi-Fi, broadband access, network switching and routing".