President Donald Trump blocked $117 billion bid Broadcom-Qualcomm deal on national security grounds on Monday. The decision broke
up what would have been the biggest deal in the American technology industry. It also sends a clear signal that Trump was willing to promote his increasingly protectionist position by taking extraordinary measures.
Monday’s presidential order said that Qualcomm’s takeover by Broadcom was prohibited, and that any substantially equivalent acquisition or merger, whether effected indirectly or directly, was also prohibited. The order cited credible evidence that led the President to believe that the deal might threaten to impair the country’s national security.
On Sunday, the United States Committee on Foreign Investment had sent a letter to both companies telling them that its panel believed the deal was a risk to national security. The letter had further warned them that it would refer its concerns to the President for rejection. The committee said that it believed its order had been violated by Broadcom after it changed its date of relocation without consulting with the government well enough.
Broadcom, which is currently based in Singapore, was in the process of moving its legal headquarters to the US in order to allay those issues. On Friday, it announced that it was planning to move up a vote by its shareholders from May 6 to March 23. That would allow it to relocate to the United States by April 3, before the rescheduled shareholder meeting of Qualcomm.
Since assuming office last year, Trump has blocked three deals that involved foreign buyers (Broadcom-Qualcomm included), based on the objections of the Committee on Foreign Investment. Previously, he prohibited the sale of Lattice Semiconductor to an investment firm linked to the Chinese government. He also stopped the acquisition of MoneyGram to an Alibaba Group’s affiliate.
A decades-old law is what gave the President the ability to prohibit external companies from acquiring American firms if there is a risk to national security. In 2016, President Obama also prohibited the sale of Aixtron to a Chinese-owned business. Other previous presidents have also used the law to stop acquisitions of US companies by overseas firms.
In a press statement on Monday, Broadcom said it would review the order, and that it does not agree that its planned Qualcomm takeover raises any concerns of national security. Broadcom is a primary maker of chips for broadband communications like routers, WIFI and modems. The company was reincorporated in Singapore several years back, but its headquarters of operation are in based in California.
Trump seems to have backtracked from his last year’s point of view when he hosted Hock Tan, who is the CEO of Broadcom at the White House. Tan told the President of his company’s plans to move its legal headquarters to the United States in their meeting in November.
The President welcomed the decision as very huge step that would create more jobs for Americans. Broadcom had earlier promised it would make the US the world leader in 5G technology. The firm had also said it would train American engineers by creating a new $1.5 billion fund.