The U.S. Treasury Department suggested it soon could recommend against the $117 billion hostile bid of Qualcomm by Broadcom, and also said that the Singapore-based company had repeatedly violated one of its orders during its pursuit of the proposed deal.
The Committee on Foreign Investment in the U.S., known as CFIUS, notified the lawyers that its investigation into Broadcom’s bid is expected to “close soon” and that it “so far” confirms the national security risks it had previously identified with the proposed deal.
“(The) investigation has so far confirmed the national security concerns,” the Treasury’s letter to Broadcom said. “In the absence of information that changes CFIUS’s assessment of the national security risks posed by this transaction, CFIUS would consider taking further action, including but not limited to referring the transaction to the president for decision.”
There has been a stalemate between the companies regarding the acquisition, with Broadcom’s bids swelling with each successive attempt. This comment by the CFUIS is a cause of worry for Broadcom.
However, in November, Trump announced and applauded Broadcom’s decision to move its headquarters to the United States, calling the company “one of the really great, great companies.” However, he has not brought up the matter recently since the stalemate started.
Broadcom is incorporated in Singapore and co-headquartered there and in San Jose, California, USA.
“Given Broadcom’s public disclosures about the redomiciliation process since last November, as well as its direct communications to CFIUS, Broadcom has been fully transparent with CFIUS about the redomiciliation process, and believes it is in full compliance with the March 4 interim order,” the company said in a statement.
Broadcom said on Monday it intends to become a U.S. corporation before any deal with Qualcomm is finalized. Following the CFIUS’s review, Broadcom has been trying to speed its redomiciliation process.
The Singapore-based company said that it’d be completed by May 6, the company on Monday said that it’d be done by April 3.
Broadcom on March 6 applied for a court hearing in Singapore regarding the redomiciliation plan, public records show.
CFIUS has concerns that the Broadcom takeover would push Qualcomm back in the race to 5G communication. That would probably result in Chinese telecom companies gaining unassailable ground, notably China’s Huawei causing even more serious security concerns for the US.
“Given well-known U.S. national security concerns about Huawei and other Chinese telecommunications companies, a shift to Chinese dominance in 5G would have substantial negative national security consequences for the United States,” a CFIUS official wrote in a March 5 letter to the companies’ lawyers.
In a letter on Friday to the Congress, Broadcom promised to drive 5G technology to new heights in the US, leaving it’s Chinese competitors in the dust.
The Wall Street Journal reported on Friday that Intel has also been concerned about Broadcom’s attempt to takeover Qualcomm. As per rumors, it may consider a range of options in response, including a bid for Broadcom. Intel has denied the rumors.
Read more on this here.