For the past few months, there’s been a will-they-won’t-they dance going on between Qualcomm and Broadcom. To be slightly more accurate, there’s been a courtship of Warner Bros. proportions between the two firms, if the part of Qualcomm were played by Penelope Pussycat and the part of Broadcom by Pepé Le Pew. Now, President Trump has announced he’s nixing the deal in a statement released by the White House on Monday.
“There is credible evidence that leads me to believe that Broadcom… through exercising control of Qualcomm… might take action that threatens to impair the national security of the United States,” the statement read. “The proposed takeover of Qualcomm by the Purchaser is prohibited, and any substantially equivalent merger, acquisition, or takeover, whether effected directly or indirectly, is also prohibited.”
The order goes on to say that the entire 15-member board of directors that Broadcom had proposed for Qualcomm are now barred from standing for those positions, that all efforts by Broadcom to purchase Qualcomm are permanently barred from going into effect, and that Broadcom is to immediately terminate all of its efforts to secure ownership of Qualcomm now and forever.
It’s the end to a saga with a bizarre number of twists and turns in recent months. To summarize a rather long story:
How the Hell Did We Get Here?
Broadcom initially made a bid for Qualcomm last year, but Qualcomm wasn’t interested. The smartphone SoC and cellular modem company has already been through the ringer with regulators of late, it’s trying to get approval for its own purchase of NXP finalized (China still has to sign off), and it felt Broadcom’s own offer wasn’t a good one. Broadcom played its own game of carrot and stick, with an improved share price offer, but also offered its own proposed board of directors slate to shareholders in a move intended to launch a hostile takeover.
Meanwhile, Qualcomm increased the price it was offering for NXP hoping to scuttle the Broadcom deal and told its shareholders they should vote against the merger. Certainly there was nothing to suggest any technical or IT merit to a merger between the two corporations, particularly not when it came to handing more and more of the semiconductor industry over to fewer and fewer companies. Broadcom has previously competed against Qualcomm in multiple markets and some Broadcom customers, like Western Digital, didn’t want to see the company merge with Qualcomm based on how badly Broadcom treated its own partners. The FTC launched an investigation of Broadcom’s actions in January.
Fast forward to just-before-now, when Qualcomm asked the Committee on Foreign Investments in the United States, or CFIUS, to rule on whether the Broadcom merger represented a threat to national security. The committee released its findings six days ago, reporting that “CFIUS has come to believe that Broadcom’s successful hostile takeover attempt of Qualcomm, including the related stock purchase, proxy contest for the election of six directors to Qualcomm’s Board as proposed and selected by Broadcom, Proposed Agreement and Plan of Merger, and any other potential merger between Broadcom and Qualcomm could pose a risk to the national security of the United States.”
The president concurs. And so endeth the proposed union of Qualcomm and Broadcom, a brief shining dream that nobody seems to have wanted, no one seems to have thought would do anybody much good, and which came with risks to national security that left everyone in the room cold. Well, except Broadcom. But as of today, they don’t count.