Trump bans Broadcom’s hostile takeover of Qualcomm, Qualcomm’s stock price fell nearly 5% after the close

According to foreign media reports, US President Trump issued an order on Monday to prohibit Broadcom’s hostile takeover of Qualcomm on the grounds of national security. Affected by this, Qualcomm shares fell nearly 5% in after-hours trading, while Broadcom's share price rose slightly.

The presidential order issued by the White House on Monday stated: “There is solid evidence that Broadcom’s attempts to control US chip maker Qualcomm’s conduct through acquisitions may jeopardize the national security of the United States. The acquirer (Broadcom) makes an acquisition. Qualcomm’s transactions have been banned, and any transaction that is substantially equivalent to mergers, acquisitions, or acquisitions is also prohibited, whether directly or indirectly.”

Broadcom’s $117 billion hostile takeover bid for Qualcomm is the largest M&A deal in the history of technology. This is also based on the objections of the U.S. Foreign Investment Commission. The U.S. president has for the first time issued an order to stop the transaction. In addition, the deal was the second M&A deal blocked since Trump took power.

The U.S. Department of the Treasury sent a letter to Broadcom last Sunday, saying that the company had failed to provide sufficient information to the National Security Council on plans to re-register the headquarters to the United States, in violation of the directive of the U.S. Treasury Department. The U.S. Foreign Investment Commission under the US Department of the Treasury pointed out that Broadcom’s “a series of actions violated” the directive issued by the U.S. Treasury on March 5. This directive requires Broadcom to notify the U.S. Foreign Investment Committee five working days in advance. The e-mail said that Broadcom had not notified the U.S. Foreign Investment Commission about its actions in three areas, including the cooperation with a Singapore court to speed up the process of re-registration to the United States.

The e-mailer said: "As of now, the investigation confirmed the national security concerns. If there is no more information to change the assessment of the national security risk decision, then the Committee for Foreign Investment in the United States will consider further actions, including but not limited to the submission of the transaction Give the president a decision."

Broadcom denied the U.S. Treasury Department’s allegations. The company said in its statement on Monday: "Considering the public disclosure of Broadcom's procedures for re-registration to the United States since November last year and direct communication with the Committee on Foreign Investment in the United States, this process is that Broadcom is a member of the Committee on Foreign Investment in the United States. Fully transparent, Broadcom believes that the company fully complied with the interim order on March 4."

Prior to Trump’s ban, Jim Lewis, an expert on U.S. foreign investment commissions at the Center for Strategic and International Studies, pointed out that the letter the U.S. Treasury issued to Broadcom was “apparently a poison.” He pointed out that the communication between the Committee on Foreign Investment in the United States and Qualcomm is "unprecedented."

The US Treasury Department issued an open letter to lawyers of Qualcomm and Broadcom on Tuesday, saying that Broadcom’s acquisition of Qualcomm may pose a threat to US national security. The U.S. Treasury Department stated in its letter that, based on historical records, Broadcom usually cuts off investments after it acquires a company, which will pose a threat to the national security of the United States. The open letter also stated: "The U.S. Foreign Investment Committee is aware of the security threats of this potential transaction and will therefore conduct a full investigation." In addition, Qualcomm is a "known and credible company" and has contracts with the U.S. Department of Defense. . In addition to national security, the U.S. government is also worried that if Qualcomm is acquired by foreign companies, the U.S. leadership in the 5G field will be lost, and China will rely on Huawei to become the 5G leader.

To ease regulatory concerns, Broadcom said on Wednesday that the company is committed to leading the United States in the global 5G race, and plans to invest 1.5 billion US dollars for the training of US technical personnel to ensure that the United States will take the lead in future wireless technologies. Broadcom also said that from every important aspect, the company is a U.S. company with a strong lineage of great American technology companies such as Hewlett-Packard, AT&T, Broadcom and Brocade. Broadcom also stated that the company is currently in the final stages of moving headquarters back to the United States. After completing the acquisition of Qualcomm's transaction, Broadcom expects to have more than 25,000 employees in the United States. They will strive to make Broadcom a leading global communications semiconductor company.

Broadcom announced in early November last year that it had submitted an offer to Qualcomm to acquire Qualcomm’s all outstanding shares at US$60 per share in cash and US$10 worth of company stocks, for a total transaction price of US$103 billion. However, the transaction at that time incurred Qualcomm’s opposition. Later, but from the current situation, this M & A deal is more like an offensive and devil farce. The two companies had not been able to compromise before and were more inclined to issue competing claims and counterclaims.

In early February, Broadcom increased its offer to Qualcomm to $82 per share for a total price of $121 billion. Of these, $60 is paid in cash, while the rest is reflected in stocks. Broadcom said that the $82 per share offer is the "best and final" quote, and said that after the merger and acquisition, two Qualcomm directors will be invited to join the new company's board of directors. Calculating the debt of Qualcomm, the total price of this transaction reached US$145 billion.

Qualcomm subsequently expressed its willingness to negotiate with Broadcom on the acquisition, but it must increase the transaction price to 160 billion US dollars, and Broadcom refused to further increase the price. After Qualcomm announced a price increase for the acquisition of NXP, Broadcom announced that it was affected by this and decided to adjust Quotcom's offer. Broadcom believes that by raising the quotation, Qualcomm's board and management equivalent to transfer Qualcomm shares worth US$4.10 (worth US$6.2 billion) from Qualcomm shareholders to NXP shareholders. For this reason, Broadcom also adjusted its offer to Qualcomm accordingly. After the adjustment, Broadcom will acquire Qualcomm for US$79 per share, with a cash portion of US$57 and the remaining 22 US dollars for stocks. Broadcom also pointed out that if Qualcomm is unable to complete the acquisition of NXP, then Qualcomm’s offer will automatically increase by US$3 per share, ie, it will return to the quote of US$82 per share.

The intervention of the U.S. government departments reflected the U.S. government’s concerns about the security of the acquisition. The U.S. Foreign Investment Committee is an agency that conducts national security audits of transactions. It generally does not review acquisitions until the company reaches an acquisition agreement. According to sources familiar with the U.S. Foreign Investment Committee's idea, Qualcomm is currently one of the major competitors of China's communications equipment manufacturer Huawei, which is in the 5G field. The committee believes that if Broadcom acquires Qualcomm, the US military is worried that in the next 10 years, “one company will dominate 5G wireless technology, and this company is Huawei. Because US operators have no other choice, they can only choose to purchase Huawei’s. equipment."

Broadcom shares rose $9.06, or 3.57%, to close at $262.84 in regular trading on the Nasdaq Stock Market on Monday. In the subsequent after-hours trading, Broadcom shares rose 1.16 US dollars, or 0.44%, to close at 264.00 US dollars. Based on Monday's closing price, Broadcom's market value is approximately US$11.34 billion.

Qualcomm’s share price fell by 0.22 U.S. dollars in regular trading on the Nasdaq Stock Market, down 0.35% to close at 62.81 U.S. dollars. Because the company was blocked by the high price of Broadcom's acquisition of the United States President, Qualcomm shares fell 2.91 US dollars in the subsequent after-hours trading, a decrease of 4.63%, to close at 59.90 US dollars. According to Monday's closing price, Qualcomm’s market value is approximately 93 billion US dollars.

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