It’s over: Broadcom officially gives up on Qualcomm

REUTERS/Mike Blake

(Reuters) – Singapore-based Broadcom withdrew its $117 billion bid to acquire Qualcomm on Wednesday, two days after US President Donald Trump blocked the attempt citing national security concerns.

The company said it has also withdrawn its slate of independent director nominees for Qualcomm’s annual shareholder meeting.

Broadcom, however, expects to continue with its plan to redomicile to the United States.

“Although we are disappointed with this outcome, Broadcom will comply with the order,” the chipmaker said.

Sources had told Reuters on Tuesday that Broadcom was ready to scrap its bid for Qualcomm.

Broadcom’s board met late on Tuesday to formalize plans to move its base to the United States, at a cost of about $500 million a year under a higher tax rate, the sources said.

Being based in the United States as opposed to Singapore should make it easier for Broadcom to make acquisitions of US companies without falling under the jurisdiction of the Committee on Foreign Investment in the United States (CFIUS).

Shares of Broadcom were untraded, while those of Qualcomm were up marginally before the opening bell.

(Reporting by Supantha Mukherjee in Bengaluru; Editing by Arun Koyyur)

Broadcom-Qualcomm timeline

Here are the important developments that have taken place since Broadcom made its first bid to buy Qualcomm:

March 13

– A dozen banks that signed on to provide a record $100 billion bridge loan to back Broadcom’s planned $117 billion takeover of Qualcomm will earn starkly less than planned for extending credit to the chipmaker after President Trump blocked the deal over national security concerns.

– Senator Chuck Schumer, the top Democrat in the U.S. Senate, praised Trump’s decision, calling China’s trade practices “rapacious.”

– Broadcom, led by dynamic Chief Executive Hock Tan, is unlikely to put the brakes on an acquisition spree after its bid was blocked by President Trump on national security grounds.

That was the immediate reaction from Wall Street’s tech sector analysts to Trump’s surprise intervention to block what would have been the biggest ever tech merger.

March 12

– President Trump signed an order to halt the deal on concerns that a takeover of Qualcomm by the Singapore-based company would erode the United States’ lead in mobile technology and give China the upper hand.

– Broadcom violated an order from a national security panel in a bid to push for a merger with Qualcomm, the U.S. Treasury Department said in a letter.

The letter said that Broadcom “took a series of actions in violation” of a previous order from Treasury.

– Broadcom said it expects to redomicile to the United States by April 3.

March 9

– Microchip maker Intel Corp responded to a news report that it is considering a possible bid for Broadcom by saying that it is focused on integrating previous acquisitions, raising doubt over the idea.

The Wall Street Journal reported that Intel’s competitive concern about Broadcom’s attempt to buy Qualcomm had led it to consider a range of acquisitions in response, including a bid for Broadcom.

– A U.S. national security panel ordered Broadcom to provide it with five business days’ notice before taking any action toward redomiciling to the United States, a regulatory filing revealed.

The previously undisclosed requirement shows that the Committee on Foreign Investment in the United States (CFIUS), which reviews foreign acquisitions of U.S. companies for potential national security risks, is aware that its jurisdiction could be contested if Broadcom redomiciles to the United States.

– Broadcom promised not to sell critical national security assets to foreign buyers if its deal for Qualcomm is approved, another effort by the firm to appease U.S. security concerns.

Separately, Qualcomm said it discontinued the role of executive chairman and named a new non-executive chairman.

March 7

Broadcom sought again to soothe U.S. security concerns around its bid for Qualcomm, saying it would stick with investments aimed at maintaining the United States’ leadership in 5G technology.

CFIUS, in an unusual move, stepped into Broadcom’s hostile takeover bid for Qualcomm this week, citing a number of concerns on the development of the next generation of mobile networks and technology.

March 6

CFIUS identified potential risks that warrant a full investigation of Broadcom’s bid, a senior U.S. Treasury official said in a letter to the companies.

Some of the US government’s concerns relate to risks associated with Broadcom’s relationships with foreign entities, Aimen Mir, the Treasury’s deputy assistant secretary for investment security, said in the letter, without identifying who those parties might be.

The letter was dated March 5 and made public by Qualcomm.

Separately, the Wall Street Journal reported that Qualcomm is in talks to settle a patent dispute with China’s Huawei Technologies and could reach an agreement in the coming weeks, citing people familiar with the matter.

March 5

Broadcom said the decision by CFIUS to review the deal was the result of secret moves made by Qualcomm on Jan. 29 to encourage an investigation into the offer.

Qualcomm said it was delaying its 2018 annual meeting to April 5 as a result of the CFIUS order.

Separately, Qualcomm, which is awaiting China’s MOFCOM approval for the $44 billion deal to buy NXP Semiconductors NV, extended the tender offer to March 9 from March 5.

March 4

The US government ordered the national security review of Broadcom’s bid for Qualcomm that prompted Qualcomm to delay its March 6 shareholder meeting.

March 2

Broadcom was planning to complete its move back to the United States by mid-May, Reuters reported, citing sources familiar with the matter.

Wrapping up the move from Singapore and redomiciling in the United States relatively quickly could remove a roadblock to Broadcom’s proposed deal by calming concerns at the national security panel, CFIUS.

Feb. 27

CFIUS began looking at Broadcom’s plan, Reuters reported, citing three sources familiar with the matter.

Feb. 26

Qualcomm appears to warm to Broadcom’s advances by saying the sides have grown closer on regulatory issues and called for talks on price after Broadcom’s latest $117 billion offer. The war of words continued, however, as Broadcom called its US semiconductor peer’s proposal to negotiate a higher price “engagement theater”.

Feb. 21

Broadcom cut its bid by $3 to $79 per share after Qualcomm raises its offer for NXP Semiconductors.

Feb. 20

Qualcomm deals a blow to Broadcom’s raised bid by increasing its offer for NXP Semiconductors to $127.50 per share in cash from $110.

Feb. 14

Representatives of Broadcom and Qualcomm meet for the first time to discuss a potential combination; Qualcomm later calls the meeting “constructive”.

Feb. 13

Broadcom scales back its challenge to Qualcomm’s board by cutting the number of board seats it was trying to win to six from 11, following a meeting with proxy advisory firm ISS.

Feb. 8

Qualcomm rejects Broadcom’s revised buyout offer of $121 billion, but proposes meeting to address the bid’s “serious deficiencies in value and certainty”.

Feb. 5

Broadcom raises its offer to $82 per share from $70 per share, calling the bid its “best and final offer”.

The revised offer is contingent on either Qualcomm acquiring NXP Semiconductors for $38 billion or the NXP deal being terminated.

Jan. 17

The Federal Trade Commission investigates whether Broadcom engaged in anticompetitive tactics in negotiations with customers, casting further doubts on regulatory approval for potential deals.

Dec. 22, 2017

Qualcomm rejects Broadcom and private equity firm Silver Lake Partners’ 11 director nominees, setting the stage for a proxy battle.

Dec. 4 , 2017

Broadcom makes its first formal move toward a hostile bid to take over Qualcomm by nominating 11 directors to its rival’s board.

Nov. 13, 2017

Qualcomm rejects Broadcom’s $103 billion takeover bid, saying the offer undervalued the company and would face regulatory hurdles.

Nov. 6, 2017

Broadcom makes unsolicited $103 billion, or $70 per share, bid to acquire Qualcomm.

(Compiled by Shravanth Vijayakumar, Shashwat Awasthi and Munsif Vengattil in Bengaluru; Editing by Bernard Orr)

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