Trump Blocks Broadcom Takeover of Qualcomm on Security Risks

American president Donald Trump issued an executive order blocking Broadcom from pursuing its hostile takeover of Qualcomm, according to Bloomberg.

Trump acted on a recommendation by the Committee on Foreign Investment in the U.S., which reviews acquisitions of American firms by foreign investors. The decision was unveiled just hours after Hock Tan, the CEO of Singapore-based Broadcom, met with officials at the Pentagon in a last-ditch effort to salvage what would have been the biggest technology deal in history.

"There is credible evidence that leads me to believe that Broadcom, by acquiring Qualcomm, might take action that threatens to impair the national security of the United States," Trump said in the order released Monday evening in Washington. The order underscores the tough stance the Trump administration is taking on foreign takeovers of U.S. technology firms.

In September, he blocked the sale of Lattice Semiconductor to a Chinese-backed investor. That was just the fourth time in a quarter century that a U.S. president stopped a foreign takeover of an American firm on national security grounds. At least a half-dozen technology deals have collapsed during the Trump administration in the face of concerns raised by CFIUS.

The order marked an unprecedented move by the White House to stop a hostile bid for a company. Broadcom didn’t have an agreement to buy San Diego-based Qualcomm. It was fighting to win support from Qualcomm shareholders to gain control of its rival’s board and move forward with its offer. Before waiting for an actual deal, CFIUS opened an investigation to review the risks to national security.

Initially, CFIUS was split on whether to weigh in. Pentagon officials insisted on a review of Broadcom’s proxy battle, while Treasury had pushed back. But on March 4, Treasury ordered Qualcomm to postpone its shareholder vote by 30 days, saying that a takeover threatened Qualcomm’s leadership in developing the next generation of wireless technology. The government said it feared Broadcom would cut investment in research and development in order to increase short-term profits. That could allow Chinese companies, namely Huawei, to become the dominant supplier, the U.S. said.

Trump’s order came as Broadcom was in the midst of moving its headquarters from Singapore to the U.S. Broadcom had announced the move in November after Tan met with Trump at the White House. After the meeting, CFIUS approved Broadcom’s takeover of Brocade Communications Systems, conditioned on the headquarters move, according to Broadcom.