Qualcomm says Broadcom deal opens national security issues

Broadcom return to US could be complete in May

USA regulators have asked giant chipmaker Qualcomm to delay an annual shareholder meeting to give them more time to investigate whether a takeover bid by Broadcom, a Singapore company that is in the process of moving to San Jose, would threaten US national security.

Broadcom Ltd. is on course to win all six of the seats it's seeking on Qualcomm Inc.'s board, giving it a majority to push forward with its hostile takeover even as a US government panel forced a delay of the final tally amid concerns about the deal's threats to national security.

According to the company, CFIUS has determined there are "national security risks" to a potential Broadcom-Qualcomm merger, and so has asked Qualcomm to delay the meeting.

"This was a blatant, desperate act by Qualcomm to entrench its incumbent board of directors and prevent its own stockholders from voting for Broadcom's independent director nominees", Broadcom said in a statement.

The crux of attention was then centered on Qualcomm's annual shareholders meeting where votes would be tallied for the board election.

On Monday, Broadcom said that it had been informed Sunday night that Qualcomm had filed a voluntary request for a Cfius review in January.

In 2011 Chinese smartphone maker Huawei was forced to unwind a $2 million offer to acquire the assets of a failed USA company, 3Leaf Systems, when CFIUS determined that 3Leaf's technology could be used in ways that were not in the best interests of the United States. Broadcom began a hostile bid for Qualcomm late past year, and has largely been rebuffed for its advances. "This can only be seen as an intentional lack of disclosure, both to Broadcom and to its own stockholders". It characterized Broadcom's release as "a continuation of its now familiar pattern of deliberately seeking to mislead shareholders and the general public".

Once Broadcom re-domiciles " now planned for no later than May 6 " the takeover would not be a CFIUS covered transaction, Broadcom said in the statement.

The company's hostile takeover attempt has come at a vulnerable time for Qualcomm, which has been embroiled in a long-running legal dispute with Apple and is facing several large fines from governing bodies across the globe, including a $1.23 billion fine recently levied against the company for breaking the European Union's antitrust laws.

Qualcomm and Broadcom are two of the biggest makers of components that are crucial to modern communications systems, including fixed-line and mobile.

Qualcomm, one of Apple's main suppliers, is now engaged in the acquisition of the Dutch group NXP and has indicated the operation will proceed regardless of the outcome of discussions with Broadcom.

Qualcomm went on to challenge an assertion that wasn't exactly what Broadcom had asserted. If that result holds up when the final vote takes place, Broadcom would have a mandate to overturn Qualcomm management's opposition to the $117 billion deal. But it now appears willing to continue to pursue its bid for Qualcomm through the CFIUS review, said Bernstein Research Analyst Stacy Rasgon in a research note.

Qualcomm's shares fell 4 percent in trading before the bell.

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