Investors were scheduled to vote on Broadcom's attempt to take control of the board at a meeting Tuesday, an event that was postponed by at least 30 days on order of the Committee on Foreign Investment in the U.S. Both companies pointed fingers at each other over the root of the CFIUS investigation.
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.
The move is a highly unusual intervention by Washington, and it effectively puts on hold Broadcom's efforts to force Qualcomm to make a deal.
"We can not overstate the likely harm (from a Broadcom hostile takeover) that would result to Qualcomm, the USA company leading the development of 5G and other next-generation technologies, as well as to the United States security interests", said the Gallagher letter. Broadcom has accused Qualcomm of failing to negotiate seriously, saying they were involved in "engagement theater". "This measure will afford CFIUS the ability to investigate fully Broadcom's proposed acquisition of Qualcomm". It characterized Broadcom's release as "a continuation of its now familiar pattern of deliberately seeking to mislead shareholders and the general public". For its part, Qualcomm thinks that Broadcom's accounting of events is implausible, as it claims its suitor has been in contact with the CFIUS "for weeks" and has made two "written submissions" to the body.
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.
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CFIUS is chaired by the U.S. Treasury Secretary and includes representatives for the U.S. Departments of Justice, Defense, Homeland Security, Energy and State. Once this all blows over, Qualcomm's shareholder meeting will be rescheduled to take place on or before the 6th of May.
President Donald Trump previous year blocked a Chinese-backed takeover of Lattice Semiconductor Corp. because of the importance of semiconductors to the USA government and China's role in the proposed acquisition.
Last month Qualcomm also unveiled a sweetened $44 billion agreement to buy NXP Semiconductors NV to expand its presence in automotive chips and build its defense against Broadcom's hostile bid. Qualcomm said it would challenge that fine.
The issue is complicated as CFIUS typically doesn't review a proposed merger until the deal is going forward, and there's no deal to review since Qualcomm has so far rejected the offers.