The rigorous battle between Qualcomm and Broadcom continues and it’s becoming more interesting. In recent times, Broadcom has had two bids rejected by Qualcomm and it is now set for a hostile takeover which Qualcomm is vehemently refuting. Qualcomm’s annual general meeting was scheduled for March 6 and they were supposed to cast votes for six board members nominated by Broadcom. There are eleven members in this board thus if all Broadcom’s nominees win, the company would be able to rubber stamp a merger approval. However, the U.S. Treasury’s Committee on Foreign Investment in the United States (CFIUS) put a stop to the meeting and requested that it needs to properly access Broadcom’s approach in the takeover bid. In compliance with CFIUS, Qualcomm postponed the meeting to April 5. Broadcom accused Qualcomm of orchestrating CFIUS actions, a claim that Qualcomm refuted.
New Dimension To Qualcomm – Broadcom Tussle
Now, there is a new twist to the whole Qualcomm – Broadcom brouhaha. The American chipmaker has now appointed a new chairman of its board, Jeffrey Henderson, replacing Paul Jacobs who has been Qualcomm’s CEO from 2005 to 2014. However, Jacobs Jnr who is the son of the co-founder of Qualcomm Irwin Mark Jacobs will remain on the board while Mr. Henderson takes up the position of non-executive chairman. This move by Qualcomm is to give its stockholders some succor that the company isn’t led by an insider.
Intel’s Place In This Deal
A new player which is Qualcomm’s arch-rival Intel is considering getting involved with this deal and the company is closely monitoring the progress of the Qualcomm – Broadcom tussle. According to a “Wall Street Journal” report, sources claim that in response to Broadcom’s hostile takeover of Qualcomm, Intel is considering a series of acquisition options, which may include a bid for Broadcom. The sources said that Intel is paying close attention to Broadcom and Qualcomm’s acquisition, and hopes to see Broadcom’s push fail because the combined company will pose a serious competitive threat to Intel. If Broadcom seems likely to win, Intel may step in and make an offer for Broadcom. After this report was released, Intel’s share price fell 1% in after-hours trading. Broadcom shares rose by more than 6%. Qualcomm’s stock price has remained basically unchanged.
CFIUS Issue With The Deal
CFIUS is a body set up to protect investments in the United States. Broadcom Ltd. is based in Singapore and CFIUS has made it bare that it has some issues with a foreign company acquiring Qualcomm (an American company). In a move to tackle CFIUS concerns, Broadcom is scheduled to become a U.S. company on May 6 registered in Delaware. CFIUS is trying to avoid a situation where all the assets of a US company are turned over to a foreign company but Broadcom in its usual manner has brought out some evidence that Qualcomm already has strong ties with the Chinese government and some Chinese manufacturers.
US Lawmakers Concerns
Well, this deal has raised a lot of dust in the US and some lawmakers have kicked against the acquisition considering the fact that the company is on the verge of transiting to the next-gen 5G connectivity. Aquisition of Qualcomm at this time doesn’t feel right. This idea by the lawmakers led Broadcom Chief Executive Hock Tan to write a letter to Washington D.C. lawmakers. He said
“The bottom line is that a combined, American Broadcom-Qualcomm will be a more focused and stronger champion for sustained United States leadership in 5G than a standalone Qualcomm, an outcome that strongly supports America’s national security interests.”
At the close of this week’s business, Qualcomm shares stood at $63.03 which is way off the bid price and Wall Street does not see the Qualcomm – Broadcom deal as feasible. Qualcomm is one of the most successful chipmakers in the world and it is well known for its Snapdragon processors which is used in many Android smartphones.