The U.S. government's Committee on Foreign Investment in the United States (CFIUS) has ordered a national security review of the proposed deal, saying a takeover can lead to lower R&D spending and weaken Qualcomm's competitive position against Chinese companies.
"Broadcom is in every important respect an American company, with a lineage of great American technology icons like Hewlett-Packard, AT&T, Broadcom Corp., and Brocade Communications Systems, Inc".
"CFIUS" determination as to whether an entity is considered "foreign' is nuanced and not prescriptive, and encompasses considerations that include a facts and circumstances assessment of ownership and formal and informal mechanisms of control", the Kirkland lawyers wrote. We also will work closely with the United States government as we drive to achieve and sustain this global leadership in 5G and beyond. But the company is in the process of moving its headquarters to the USA, which it expects to complete in May. The Singapore Court will then have to greenlight the redomiciliation.
"Broadcom will not sell any critical national security assets to any foreign companies", the letter said.
The anonymous sources asked not to be identified because details of CFIUS' order to Broadcom and Qualcomm are classified.
Qualcomm could not immediately be reached for comment. They were to have voted on Broadcom's nominations for six replacement Qualcomm board members - if successful, the predator would have gained a potential majority on the 11-person board, paving the way for acceptance of its bid.
CFIUS, an inter-agency panel led by the U.S. Treasury, rarely reviews mergers before a deal has been clinched. China wants desperately to take the lead in technology from the USA and 5G is only one of several areas they are eager to control.
A U.S. government panel, in an unusual move, stepped into Singapore-based Broadcom's hostile takeover bid for Qualcomm this week, citing a number of concerns around the development of the next generation of mobile networks and technology. It added that more than half of Broadcom's total workforce is in the United States, across more than 25 states, encompassing Colorado, Texas, California, and Pennsylvania.