USA regulators ask Qualcomm to delay shareholder meeting

USA regulators ask Qualcomm to delay shareholder meeting

The panel, the Committee on Foreign Investment in the United States, or CFIUS, typically works behind closed doors and reviews deals only after they are announced.

San Diego-based Qualcomm has emerged as one of the biggest competitors to Chinese companies vying for market share in the sector, such as Huawei Technologies Co, making it a prized asset.

"We can not overstate the likely harm [from a Broadcom hostile takeover] that would result to Qualcomm, the USA company leading the development of 5G and other next-generation technologies, as well as to the United States security interests", said the Gallagher letter. In the letter, Cornyn also noted Qualcomm's significant role in the development of 5G technologies and that the United States is competing against China in this field.

Broadcom said it would cooperate with the CFIUS review but added that it had just learned that the investigation was due to a secret, voluntary request from Qualcomm in January.

"This shows how indirect exposure to China is a frequent, but under-noticed, source of perceived national security risk", said Mario Mancuso, a former CFIUS member who is now a partner at law firm Kirkland & Ellis LLP.

CFIUS is expected to gain more authority.

Canyon Bridge Capital Partners LLC, a US -based private equity firm funded by the Chinese government, saw its $1.3 billion acquisition of USA chipmaker Lattice Semiconductor Corp collapse past year after it was blocked by CFIUS, a rejection subsequently upheld by Trump.

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Reuters reported last week that CFIUS had begun looking at Broadcom's bid as pressure grew from politicians, including senior Republican U.S. Senator John Cornyn.

In a February 26 letter to Treasury Secretary Steve Mnuchin, Rep. John Cornyn, R-Texas, the second-ranking Republican in the House of Representatives, asked Mnuchin to have CFIUS get involved given not only that a China-based company was trying to buy an American entity, but that it was doing so through a hostile takeover. In practice, reviews by CFIUS often lead to the demise of deals.

Still, while the government may not approve of the takeover, a CFIUS review does not necessarily mean the deal will be halted.

At the now-postponed meeting, Qualcomm shareholders were going to vote whether to replace six Qualcomm board directors with Broadcom-nominated candidates, a move that could accelerate the acquisition if those candidates were elected and took a majority position on the board.

Broadcom's attempted takeover of Qualcomm, first unveiled in November, would be the largest technology deal in history.

The company's hostile takeover attempt has come at a vulnerable time for Qualcomm, which has been embroiled in a long-running legal dispute with Apple and is facing several large fines from governing bodies across the globe, including a $1.23 billion fine recently levied against the company for breaking the European Union's antitrust laws. The company's CEO, Hock Tan, was born in Malaysia and is now a USA citizen.

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