US CFIUS requires Qualcomm's shareholders to postpone the investigation and will fully investigate Broadcom's acquisition!
Qualcomm initially planned to hold a shareholders' meeting on March 6, local time, to elect a new board member. However, Broadcom intended to launch a proxy contest during the same meeting. Qualcomm's board had previously supported the acquisition, but the situation has since shifted dramatically.
According to Reuters, the U.S. Department of the Treasury issued a temporary injunction through the Committee on Foreign Investment in the United States (CFIUS), forcing Qualcomm to delay its annual shareholders’ meeting scheduled for March 6. The delay is meant to give CFIUS 30 days to thoroughly investigate Broadcom’s bid to acquire Qualcomm.
The battle between Broadcom and Qualcomm began last year when Broadcom proposed a $100.5 billion offer to acquire the company. To gain control, Broadcom nominated 11 candidates for Qualcomm’s board, aiming to replace all existing directors. This move sparked outrage among Qualcomm’s current board and management, who refused to allow Broadcom’s nominees to be elected.
In response, Qualcomm announced that none of Broadcom’s candidates would be appointed at the March 6 meeting. Instead, the current 11 directors would run again. To further resist the takeover, Qualcomm implemented various countermeasures, including severance packages for executives, partnerships with other companies to oppose the acquisition, and a stock repurchase plan to boost share prices.
Broadcom later increased its offer by 17% to over $121 billion and reduced the number of nominees to six, claiming it aimed to preserve board continuity and gain shareholder support. However, Qualcomm found the offer still unattractive and criticized Broadcom’s lack of sincerity.
To strengthen its position, Qualcomm raised its offer for NXP Semiconductors from $110 to $127.50 per share, increasing the total deal to around $44 billion. This move was seen as a strategic effort to make a Broadcom acquisition more difficult, both financially and in terms of regulatory hurdles.
In response, Broadcom lowered its offer to $117 billion, prompting Qualcomm to take a surprising turn. It proposed a $160 billion deal, including debt, and encouraged Broadcom to conduct due diligence and negotiations. A breakup fee of up to $14.4 billion was also introduced, making the deal significantly more expensive for Broadcom.
While this shift caught Broadcom off guard, it remains unlikely that they will accept such high terms. Broadcom may still pursue a proxy fight, aiming to win a majority of board seats at the shareholders’ meeting.
However, the meeting was postponed by CFIUS, which now has 30 days to review the transaction. This delay complicates Broadcom’s strategy, especially as the company plans to move its headquarters back to the U.S. from Singapore. The relocation, expected in May, was intended to ease regulatory concerns, but it may not happen in time.
Additionally, the European Union has expressed concerns about data security if Broadcom acquires Qualcomm, particularly regarding access to sensitive information from EU citizens. Meanwhile, China has yet to approve Qualcomm’s purchase of NXP, and its decision could influence the outcome of Broadcom’s bid.
With the U.S. government now involved and Chinese regulators watching closely, the future of the acquisition remains uncertain. As the situation unfolds, both companies are navigating a complex web of political, financial, and regulatory challenges.
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