Massive chipmaker Qualcomm, currently targeted by aggressive acquisition attempts by Broadcom, is now delaying a pivotal meeting with shareholders this week that would determine its fate going forward by at least a month to comply with regulators regarding the deal.
The CFIUS — the Committee on Foreign Investment in the United States — has requested that Qualcomm delay the meeting while it reviews Broadcom’s moves to try to acquire the company. Qualcomm said in a statement today that it would comply with that request and push back the shareholder meeting by at least 30 days. It’s the latest major salvo in one of the largest biggest deals of all time to acquire the $95 billion fabless chipmaker in what would be a massive consolidation of the industry owned by Singaporean-based Broadcom. You can find Qualcomm Snapdragon processors in many modern smartphones, but it’s best known for modem technology that would potentially power next-generation 5G networks.
“In compliance with the CFIUS order, Qualcomm will delay its Annual Meeting of Stockholders and election of directors for at least 30 days so that CFIUS can fully investigate Broadcom Limited’s proposal to acquire Qualcomm,” Qualcomm said in a statement.
“Broadcom, which is run by a Board of Directors and senior management team consisting almost entirely of Americans, and which is largely owned by the same United States institutional investors that own Qualcomm, recognizes the important role CFIUS plays in protecting our national security, and is fully committed to cooperating with CFIUS in any review, just as Broadcom did during its prior successful acquisitions, including its acquisition of Brocade at the end of 2017,” Broadcom said in its own statement.
The move signals some increasing scrutiny by the U.S. government when it comes to foreign companies and international acquisition moves like this. As usual as part of this deal, it appears to be a very company-said/company-said situation, with the exact details remaining somewhat murky. Both companies issued strongly-worded statements, as is often the case in this situation. Qualcomm’s shareholder meeting, set to take place on Wednesday, could potentially be a turning point for the deal which Qualcomm has said undervalues the chipmaker as Broadcom looks to aggressively take over the company through a direct appeal to shareholders.
Here are some excerpts from the back-and-forth, starting with Broadcom:
“Broadcom was informed on Sunday night that on January 29, 2018, Qualcomm secretly filed a voluntary request with CFIUS to initiate an investigation, resulting in a delay of Qualcomm’s Annual Meeting 48 hours before it was to take place,” Broadcom said in a statement. “This was a blatant, desperate act by Qualcomm to entrench its incumbent board of directors and prevent its own stockholders from voting for Broadcom’s independent director nominees.”
It is critical that Qualcomm stockholders know that Qualcomm did not once mention submitting a voluntary notice to CFIUS in any of its interactions with Broadcom to date, including in the two meetings on February 14, 2018 and on February 23, 2018. This can only be seen as an intentional lack of disclosure – both to Broadcom and to its own stockholders. This brings Qualcomm’s “engagement theater” to a new low.
And here’s part of the statement from Qualcomm:
Broadcom Limited’s response to the order from the Committee on Foreign Investment in the U.S. (CFIUS) is a continuation of its now familiar pattern of deliberately seeking to mislead shareholders and the general public by using rhetoric rather than substance to trivialize and ignore serious regulatory and national security issues. CFIUS is an independent, multi-agency U.S. governmental body charged with protecting U.S. national security. CFIUS has determined that there are national security risks to the United States as a result of and in connection with the transaction proposed by Broadcom.
“Broadcom’s dismissive rhetoric notwithstanding, this is a very serious matter for both Qualcomm and Broadcom. Broadcom’s claims that the CFIUS inquiry was a surprise to them has no basis in fact. Broadcom has been interacting with CFIUS for weeks and made two written submissions to CFIUS.
This has been a very tense situation between both companies after Broadcom gave a tender offer of what amounted to around $121 billion, which the chipmaker rejected. During this process, Qualcomm appears to be trying to close out its acquisition of NXP in a timely fashion, a move which spurred Broadcom to lower its offer price for the company. Qualcomm, meanwhile, is embroiled with its own issues in an ongoing spat with Apple.
We reached out to Qualcomm for some additional information and will updated the post when we hear back.
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