Singapore-based tech company Broadcom Limited announced Wednesday that it will comply with President Donald Trump’s orders and cancel plans to force a takeover of U.S. chip maker Qualcomm.
Trump took the unusual step to block the planned acquisition of Qualcomm after a government investigation determined the company sale to a foreign group would impair national security. (RELATED: Trump Spikes Massive Foreign Takeover Of Tech Firm)
“Although we are disappointed with this outcome, Broadcom will comply with the Order,” Broadcom said in a statement Wednesday, adding that it will continue with plans to relocate its headquarters to the U.S. as CEO Hock Tan promised Trump during a ceremony at the White House on Nov. 2.
Broadcom thanked both its own stockholders and Qualcomm stockholders, some of whom have expressed concern at the future of the company. Trump’s order, which follows an investigation by the Committee on Foreign Investment in the U.S. (CFIUS), also prohibited 15 of the candidates Broadcom had hoped to elect to the Qualcomm board as proxies at a March 6 shareholder meeting.
The inter-agency committee directed Qualcomm to postpone that meeting to avoid what many called a hostile takeover for 30 days in an interim order.
Broadcom said earlier this year it would fully be a U.S. domiciled company by May 6. Less than a week after the meeting had been postponed, Broadcom said Monday it would be a full U.S. company April 3, days before the rescheduled Qualcomm board meeting.
Broadcom breached the order and took steps to hurry the move to the U.S. without notifying the government, a senior official said in a Sunday letter from the U.S. Department of the Treasury, which manages the CFIUS process. (RELATED: Broadcom Scrambles To Move To The US So It Can Take Over Chip Maker)
Congress applauded Trump’s move to block the merger. Even Democratic Senate Minority Leader Chuck Schumer praised the action. “Let me say unequivocally: President Trump and his administration made the right decision on blocking Broadcom from taking over Qualcomm,” Schumer said in a Senate floor speech Tuesday. (RELATED: Schumer: Trump ‘Made The Right Decision’ Blocking Tech Hostile Takeover [VIDEO])
The administration and members of Congress became concerned about the national security issues of handing over Qualcomm, the largest domestic semiconductor manufacturer and leader of 5G technology, to a foreign entity. Some were concerned Broadcom may break up parts of company, ceding strategic ground in telecommunications development to China.
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Qualcomm’s classified work for the government, including secret Department of Defense contracts, were also too sensitive to trust to a foreign-controlled company.
Treasury Secretary Steven Mnuchin, who also chairs CFIUS, was careful to note the sensitivity of the issue did not reflect poorly on Broadcom’s employees. “This decision is based on the facts and national security sensitivities related to this particular transaction only and is not intended to make any other statement about Broadcom or its employees, including its thousands of hard working and highly skilled U.S. employees,” Mnuchin said Monday.
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