Broadcom dangles 5G promise to save Qualcomm deal

On Sunday, the Committee on Foreign Investment in the U.S., or CFIUS, which is chaired by Treasury and reviews deals that have a national security risk, convinced Qualcomm to postpone a shareholder vote on Broadcom's bid that was scheduled for March 6.

Broadcom's ongoing attempt to acquire Qualcomm, a deal that would be the largest tech merger in history, hit another roadblock this week when the United States government made a decision to intervene.

Assuming its aim was to scupper Broadcom's hostile takeover, the Qualcomm board seems to have played a blinder in getting the CFIUS involved.

"While the United States remains dominant in the standards-setting space now, China would likely compete robustly to fill any void left by Qualcomm as a result of this hostile takeover", according to the Treasury Department. The concern comes mainly from the fact that China-based Huawei has been spending money on 5G development and now holds about 10% of essential 5G patents.

The semiconductor industry is locked in a race to develop chips that power so-called 5G wireless technology.

Huawei has close ties with telecom operators in Europe and Asia, and has a dominant position in China, which is expected to form t he largest market for 5G. Instead the CFIUS's unease hinges on Qualcomm being a national champion in the areas of standard-setting and chip R&D and the apparent concern that it would be diminished in this respect once in the suffocating embrace of Broadcom.

The Committee on Foreign Investment in the United States (CFIUS) has been reviewing the acquisition on a request from Qualcomm.

Instead, Broadcom has resorted to what is essentially a hostile takeover by putting forward a slate of six Broadcom nominees for Qualcomm's 11-member board.

Four days later, Broadcom announced its Qualcomm bid.

It's still unclear how exactly all of this will shake out, but needless to say, it's not looking good for Broadcom right now. Broadcom is also looking to become a USA company registered in business friendly DE, before the stockholder vote.

If I had to put money on how this all goes down, I doubt Broadcom will be able to convince the government to let this deal to go through. Last we heard, Qualcomm had set an asking price of $160 billion for the buyout after months of back-and-forth between the two tech giants, but now any possible deal may have completely hit the rocks due to outside interference. "They would just have to buy Huawei (equipment)". "Entrusting this effort to a failing Qualcomm management who lack the support of its owners, and that pays out much of its excess cash flow in fines as a result of serial lawbreaking, would not be in America's long-term interests". The Motley Fool recommends Broadcom Ltd.

  • Tracy Klein