LDN - Business

U.S. security panel delays Broadcom-Qualcomm merger showdown

[March 05, 2018] By Sonam Rai

(Reuters) - A U.S. national security panel on Sunday ordered Qualcomm Inc <QCOM.O> to put off its March 6 annual shareholder meeting by a month, delaying a long awaited showdown in the company's attempt to fend off a takeover by Singapore-based Broadcom Ltd <AVGO.O>.

The order adds to signs that Broadcom's promise to move its official base back to the United States before it completes the proposed $117 billion takeover may not be enough for U.S. officials at a time when international trade tensions are rising.

Reuters had reported last week that the panel, which can stop mergers that could harm U.S. security, had begun looking at Broadcom's bid, after pressure from politicians including senior Republican Senator John Cornyn.

Separately, Broadcom said on Monday that the decision by CFIUS was the result of secret moves made by Qualcomm on Jan. 29 to encourage an investigation into the offer, which Qualcomm's board has said significantly undervalues the company.

The Committee asked Qualcomm to postpone the annual meeting and election of directors by 30 days.

"This measure will afford CFIUS the ability to investigate fully Broadcom's proposed acquisition of Qualcomm," the U.S. Department of Treasury said in a statement.

Before Broadcom disclosed its buyout offer for Qualcomm in November, President Donald Trump himself announced Broadcom's plan to shift its headquarters back to the United States after a White House meeting with Chief Executive Hock Tan.

Trump praised the move at the time, calling Broadcom "one of the really great, great companies."

Broadcom said on Monday it is run by a board and senior management team consisting almost entirely of Americans and is largely owned by the same U.S. institutional investors that own Qualcomm.

"Broadcom continues to pursue the redomiciliation process as expeditiously as possible," Broadcom said. "Upon completion of the redomiciliation, Broadcom’s proposed acquisition of Qualcomm will not be a CFIUS covered transaction."

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A Qualcomm sign is pictured in front of one of its many buildings in San Diego, California November 5, 2014. REUTERS/Mike Blake

EXCUSE

Qualcomm, which has told shareholders it is open to the merger at the right price and terms, said last week it had no intention of delaying the annual shareholder meeting.

"Qualcomm now has their excuse to postpone their critical vote, giving them some breathing room to work on NXPI, attempt to make progress on their Apple licensing issues, and attempt to build a stronger case for shareholders," said Bernstein analyst Stacy Rasgon.

Qualcomm is in a legal battle with Apple Inc <AAPL.O> over licencing and allegations that it has not delivered on promised rebates - seen by analysts as an effort by Apple to undermine Qualcomm's strong position in mobile chips.

Last month Qualcomm also unveiled a sweetened $44 billion agreement to buy NXP Semiconductors NV <NXPI.O> to expand its presence in automotive chips and build its defense against Broadcom's hostile bid.

Broadcom, whose six nominees for Qualcomm's board are up for a vote at the shareholder meeting, said on Monday Qualcomm had not disclosed any approach to CFIUS in meetings between the two sides over the past month.

"This can only be seen as an intentional lack of disclosure – both to Broadcom and to its own stockholders," the Singapore-based chipmaker said in a statement.

Qualcomm and Broadcom were not immediately available for comment.

Qualcomm's shares fell 2 percent in trading before the bell. Broadcom shares were untraded.

(Reporting by Sonam Rai and Supantha Mukherjee in Bengaluru; Editing by Arun Koyyur and Patrick Graham)

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