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President Trump halts Broadcom takeover of Qualcomm


(Reuters) - U.S. on Monday blocked Ltd's proposed takeover of Inc on national security grounds, ending what would have been the industry's biggest deal ever amid concerns that it would give the upper hand in

The presidential order reflected a calculation that the United States' lead in creating and setting standards for the next generation of would be lost to if Singapore-based took over San Diego-based Qualcomm, according to a

has emerged as one of the biggest competitors to China's in the sector, making a prized asset.

had earlier rebuffed Broadcom's $117 billion bid, which was under investigation by the in the (CFIUS), a multi-agency panel led by the Treasury Department that reviews the national security implications of acquisitions of U.S. corporations by foreign companies.

In a letter on March 5, CFIUS said it was investigating whether would starve of research dollars that would allow it to compete and also cited the risk of Broadcom's relationship with "third party foreign entities."

While it did not identify those entities, the letter repeatedly described as the leading company in so-called development and standard setting.

"A shift to Chinese dominance in would have substantial negative national security consequences for the United States," CFIUS said. "While the remains dominant in the standards-setting space currently, would likely compete robustly to fill any void left by as a result of this hostile takeover."


A on Monday confirmed that the national security concerns related to the risks of Broadcom's relationship with third party foreign entities.

A source familiar with CFIUS' thinking had said that, if the deal was completed, the was concerned that within 10 years, "there would essentially be a in all of these technologies and that's essentially Huawei, and then the American carriers would have no choice. They would just have to buy Huawei (equipment)."

Huawei has been forging closer commercial ties with big telecom operators across and Asia, putting it in prime position to lead the global race for networks despite U.S. concerns.

Huawei has a dominant position in China, which is set to become the world's biggest market by far, and has also made inroads in the rest of world to compete with rivals such as and in several lucrative markets, including countries that are longstanding U.S. allies.

is also a major player in 5G, estimated to have 15 percent of 5G-essential patents in the world, compared with 11 percent for and 10 percent for all of China, according to a Jefferies report citing LexInnova research. Many makers are counting on to deliver its chipset on time in late 2018 to roll out their phones in 2019.

Shares of rose less than 1.0 percent to $264.10 in after-hours trade while fell 4.3 percent to $60.14.

said it was reviewing the presidential order. "strongly disagrees that its proposed acquisition of raises any national security concerns," it said in a statement in response to the decision.

Qualcomm, which had delayed its annual shareholder meeting during the CFIUS review, set the new date for March 23.

The move by Trump to kill the deal comes only months after the U.S. himself stood next to at the White House, announcing the company's decision to move its headquarters to the and calling it "one of the really great, great companies."

This is the fifth time a U.S. has blocked a deal based on CFIUS objections and the second deal Trump has stopped since assuming office slightly over a year ago.

"The proposed takeover of by the Purchaser (Broadcom) is prohibited, and any substantially equivalent merger, acquisition, or takeover, whether effected directly or indirectly, is also prohibited," the presidential order released on Monday said.

The order cited "credible evidence" that led Trump to believe that Broadcom's taking control of "might take action that threatens to impair the national security of the "


had struggled to complete its proposed deal to buy Qualcomm, which had cited several concerns including the price offered and potential antitrust hurdles.

The presidential decision to block the deal cannot be appealed. However, it is not clear what rules would have to follow if it goes ahead with announced plans to move its headquarters to the

Companies may challenge CFIUS's jurisdiction in court but may not challenge the inter-agency panel's national security findings, a CFIUS expert said.

If decides to press on with its effort to buy Qualcomm, it would be wise to drop the matter for now while the company quietly wraps up its move to the United States, a second CFIUS expert said. Once the move is done, could argue that CFIUS does not have jurisdiction, the second expert said.

Both spoke privately to protect relationships.

(Reporting by Diane Bartz, and in Washington; Supantha Mukherjee; Pushkala Aripaka in Bengaluru; Greg Roumeliotis in New York and Steve Nellis in San Francisco; Sijia Jiang in Hong Kong; Writing by Peter Henderson; Editing by and Leslie Adler)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, March 13 2018. 08:14 IST