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Here’s Why The US President Blocked The $117b Singapore Based Broadcom Buyout Of Qualcomm

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US President Donald Trump blocks Broadcom buyout of Qualcomm

Looks like the big competition to Intel may not be happening after all as its shares jumped over 4%, hitting a record high of $53.76, Tuesday morning after US President Donald Trump blocked Broadcom’s proposed $117 billion buyout of Qualcomm. The arrangement would have made a noteworthy competitor for the chip maker.

Intel, which generally has not been a noteworthy player in mobile chips, has been attempting to develop its essence in the fragment and even considered entering a contending offer for Qualcomm to fight off the risk of expanded rivalry.

Citing national security concerns, President Donald Trump on Monday blocked a Singapore-based company from buying the American Qualcomm even as some accuse him of pushing his “protectionist” agenda forward in spite of concerns such moves could attract a retaliation from other countries. 

In a White House website post, the US President said

“There is credible evidence that leads me to believe that Broadcom Limited, a limited company organized under the laws of Singapore (Broadcom), along with its partners, subsidiaries, or affiliates, including Broadcom Corporation, a California corporation, and Broadcom Cayman L.P., a Cayman Islands limited partnership, and their partners, subsidiaries, or affiliates (together, the Purchaser), through exercising control of Qualcomm Incorporated (Qualcomm), a Delaware corporation, might take action that threatens to impair the national security of the United States.”

US presidents have once in a while taken such measures, and the official request is a pointer to foreign relation strains  between the US and most of its allies as Trump doubles down on his “America first” agenda. But there is also the concern about cyber war and espionage and some allies have not been spared. Chinese and American governments have been suspicious of each other over time which is why you see deals between Chinese or even Russian companies and American get scrutinised. Huawei has for example attempted to enter the American market deeply by attempting to acquire some companies but has been blocked by US administrations. The FBI has for example warned US public institutions to beware of the Russian anti-malware software Kaspersky. So such moves are quite common.

The White House though sees the Broadcom move as a hostile takeover which they feel the need to block for national security reasons. The deal itself came under scrutiny by a national security panel called the Committee on Foreign Investment in the United States (CFIUS), which advises American presidents.

Broadcom reportedly tried to take over with an attempt to assume control over Qualcomm’s 11-member board with six of its own chosen people. That drama was set to reach a crucial stage at a Qualcomm investor meeting in March — a gathering that was deferred by 30 days, to April 5, at the demand of CFIUS.

That gathering has since been rescheduled again to March 23 in light of Trump’s official request.

In spite of the fact that Broadcom surrendered some ground to CFIUS, it quit the whole “game” with Qualcomm. The organisation brought down its offer to $117 from $121 billion toward the finish of February as a method for punishing Qualcomm board members who endeavoured to prevent the take over from happening and this is known in the business world as the “poison pill” approach. Well it looks like the deal won’t be happening at least for the foreseeable future.

There is the political side like I mentioned which is that Trump might be protecting American companies and depending on what aisle of the divide you’re on, it could be a good or bad move. Good in that the company stays American and continues to promote US values or bad if you think it could not just hamper American relationship with allies but that American companies which rake in most of their revenue from overseas nations could come under renewed scrutiny by other governments.

 

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