06 March, 2018
In what can only be described as an unusual move, the U.S. Committee of Foreign Investment in the United States (CFIUS) has ordered Qualcomm Inc. Now Broadcom won't get that opportunity, as the meeting has been delayed while the USA government investigates the deal.
"This can only be seen as an intentional lack of disclosure - both to Broadcom and to its own stockholders", the Singapore-based chipmaker said in a statement.
Shareholders at Qualcomm's annual meeting were to vote whether to replace six of the California company's 11 board members with candidates backed by Broadcom, essentially endorsing the merger deal. That reincorporation is due to be completed by early May, and Broadcom has argued that its status as a soon-to-be USA company means the deal should not be subject to review. The filing means there will be investigation into the objective of the Singapore-based Broadcom's motives behind the acquisition of the US-based Qualcomm.
See stocks near a buy point, get chart pattern recognition and run custom screens. Qualcomm has so far resisted the unsolicited bid as too low and fraught with regulatory challenges.
An increasing number of devices rely on the semiconductors developed by companies like Qualcomm and Broadcom, with chip sales totaling more than $410 billion a year ago alone.
"Qualcomm now has their excuse to postpone their critical vote, giving them some breathing room to work on NXPI, attempt to make progress on their Apple licensing issues, and attempt to build a stronger case for shareholders", said Bernstein analyst Stacy Rasgon. "This measure will afford CFIUS the ability to investigate fully Broadcom's proposed acquisition of Qualcomm".
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CFIUS is chaired by the U.S. Treasury Secretary and includes representatives for the U.S. Departments of Justice, Defense, Homeland Security, Energy and State.
The meeting, scheduled for Tuesday, will be pushed back for at least 30 days, Qualcomm said.
Qualcomm shares are down 0.6% to $64.34. Qualcomm said it would challenge that fine. If that result holds up when the final vote takes place, Broadcom would have a mandate to overturn Qualcomm management's opposition to the $117 billion deal.
In addition, Qualcomm claims that the investigation is no surprise to Broadcom, which has been in communication with the USA agency "for weeks" and has made two written submissions to CFIUS itself.
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.
The San Diego-based company's stock was trading at $64, down about 1 percent, on Monday morning.