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: [[ticker: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: [[ticker: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.

Author: Bruce V. Bigelow

In Memoriam: Our dear friend Bruce V. Bigelow passed away on June 29, 2018. He was the editor of Xconomy San Diego from 2008 to 2018. Read more about his life and work here. Bruce Bigelow joined Xconomy from the business desk of the San Diego Union-Tribune. He was a member of the team of reporters who were awarded the 2006 Pulitzer Prize in National Reporting for uncovering bribes paid to San Diego Republican Rep. Randy “Duke” Cunningham in exchange for special legislation earmarks. He also shared a 2006 award for enterprise reporting from the Society of Business Editors and Writers for “In Harm’s Way,” an article about the extraordinary casualty rate among employees working in Iraq for San Diego’s Titan Corp. He has written extensively about the 2002 corporate accounting scandal at software goliath Peregrine Systems. He also was a Gerald Loeb Award finalist and National Headline Award winner for “The Toymaker,” a 14-part chronicle of a San Diego start-up company. He takes special satisfaction, though, that the series was included in the library for nonfiction narrative journalism at the Nieman Foundation for Journalism at Harvard University. Bigelow graduated from U.C. Berkeley in 1977 with a degree in English Literature and from the Columbia University Graduate School of Journalism in 1979. Before joining the Union-Tribune in 1990, he worked for the Associated Press in Los Angeles and The Kansas City Times.