A national security panel that can stop mergers that could harm US security has begun looking at Singapore-based Broadcom Ltd’s plan to take over rival chipmaker Qualcomm Inc, three sources familiar with the matter said.
The the Committee on Foreign Investment in the US (CFIUS), an opaque interagency panel, has been in touch with at least one of the companies in the proposed merger, one source said, and last month met to discuss the potential merger of the two big semiconductor companies, two sources familiar with the matter said.
US Senator John Cornyn, the No. 2 Republican in the US Senate, on Monday urged US Secretary of the Treasury Steven Mnuchin to have CFIUS officially review the proposed transaction before a key shareholder vote expected on Tuesday next week, according to a letter seen by Reuters.
The pre-deal discussions by CFIUS — which are extremely rare — suggest Broadcom’s plans to move its headquarters to the US before it completes its proposed purchase of Qualcomm might not be enough to sidestep a national security review that could threaten the deal.
Part of CFIUS’ concern, which is echoed in Cornyn’s letter, could lie in the fact that Broadcom has failed to strike a deal with Qualcomm and has resorted to what is essentially a hostile takeover by putting forward a slate of six Broadcom nominees for Qualcomm’s 11-member board.
If the six are elected on Tuesday, the vote would give control of Qualcomm to Broadcom’s nominees. That would happen before a CFIUS review or anti-trust review is complete.
“I urge CFIUS to promptly review Broadcom’s proposed acquisition of control of Qualcomm’s board, and to act prior to the March 6 Qualcomm meeting to address any national security concerns that may be identified,” Cornyn wrote to Mnuchin in the letter.
A spokesman for CFIUS declined to comment.
A CFIUS review in itself does not mean a deal will be halted. CFIUS, under US President Donald Trump and former US president Barack Obama, has soured on high-tech deals, particularly involving semiconductors, or involving sensitive information about US citizens.
Microprocessor expert Linley Gwennap of the Linley Group said that Qualcomm had world-leading chips in several areas.
“Qualcomm is a crown jewel of the American semiconductor industry,” he said. “I would think that CFIUS would be very protective of that... Singapore is nominally a friendly country, but it still seems dangerous for that level of technology to go overseas.”
Singapore-based Broadcom struggled to win CFIUS approval to buy Brocade Communications Systems Inc late last year.
In the end, that approval came just weeks after Broadcom CEO Hock Tan (陳福陽) announced in an Oval Office ceremony with Trump that Broadcom would return its headquarters to the US.
Broadcom declined to comment on the CFIUS process for this deal, but reiterated that it intends to move forward with its move to the US after receiving approval to do so, which is expected on May 6.
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