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Qualcomm - Broadcom takeover bid

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“Boy, that escalated quickly. I mean, that really got out of hand fast!”—Ron Burgundy talking about the latest developments in the Broadcom/Qualcomm deal. 

And he’s not wrong. This epic Semiconductor Saga gave us another head fake, as the U.S. government ordered Qualcomm (-1.13%) to delay its shareholders meeting—originally set for today—for at least 30 days. 

Remember: Broadcom (-1.55%) nominated six directors to Qualcomm’s board. And if these directors were elected, the chances of Broadcom’s $117 billion hostile takeover bid would have increased. 

While thereÂ’s enough meat here to fill 10 newsletters, letÂ’s boil it down by focusing on this one (very important) question:

Why is the U.S. government getting involved?

Answer: Concerns over national security.

To understand why that’s a concern, meet an obscure but powerful government panel known as CFIUS (Committee on Foreign Investment in the United States). 

This committee makes sure all M&A activity coming from overseas to the U.S. is kosher. Basically, it prevents foreign companies from using a domestic subsidiary as a Trojan horse to steal tech and IP. And in this case, CFIUS is investigating whether Broadcom is trying to use Qualcomm as its Trojan horse.

What’s raising a red flag: Broadcom, a Singapore-based company, is notorious for its takeover & cost-cutting combo. Regulators worry that it will wind down Qualcomm’s leading 5G program, paving the way for Chinese companies (like Huawei) to flood the U.S. market.

What doesn’t add up: 1) Broadcom said it’ll be moving its HQ from Singapore to the U.S…so moving forward, should Broadcom even be considered a foreign company? And 2) there’s little to no precedent for CFIUS to investigate a deal before one was agreed upon.

Here’s what we do know: This is as exciting as the semiconductor world gets, so enjoy it.

http://morningbrew.cmail20.com/t/j-l-bjjeky-yhyuhjkhdk-k/

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