The surprise move by a government panel that scrutinizes deals by foreign companies comes amid a charged political atmosphere in which scrutiny of takeovers of USA companies by worldwide challengers has increased drastically.
"The CFIUS issued an interim order to Qualcomm directing it to postpone its annual stockholders meeting and election of directors by 30 days", said a spokesperson from the U.S. Department of the Treasury, which chairs the interagency regulatory committee. Broadcom has yet to announce where it will move, though its current base of operations in the U.S.is in San Jose, Calif. Qualcomm is based in San Diego. Qualcomm's board has repeatedly rejected the offer, so Broadcom is asking shareholders to elect a new board.
Qualcomm Chief Executive Officer Steve Mollenkopf has so far received the second-lowest number of votes among the combined 17 nominees from both sides, according to the data seen by Bloomberg. However, in recent weeks, Qualcomm has become more receptive to Broadcom's proposal - that is if the company can sweeten its offer price and pass regulatory oversight. Broadcom called the move "a blatant, desperate act", saying that it expected to complete redomiciling by May 6 and claiming that it would not be under CFIUS jurisdiction. CFIUS still has to rule on the potential acquisition, of course, but Qualcomm is probably hoping that an outcry against the takeover of state-of-the-art technology by a foreign buyer will force Broadcom to go away.
Broadcom, based in Singapore, has pledged to move its headquarters to the US, which it believes would remove CFIUS jurisdiction. Broadcom had nominated a slate of directors supportive of the tie-up. The company said it recognizes "the important role CFIUS plays in protecting our national security, and is fully committed to cooperating with CFIUS in any review".
Broadcom is pursuing a hostile takeover of Qualcomm, which would be the largest technology deal in history, creating a giant chip maker whose products would be in the majority of the world's smartphones.
They were joined late Friday by five other members of Congress, led by Wisconsin Republican Mike Gallagher. The company already is run from the United States, has many USA employees, and owns critical semiconductor operations and technologies, Rasgon noted. "A disruption of Qualcomm's R & D efforts would in effect hand the growing competition for 5G to China".