Is Broadcom's Hostile Qualcomm Bid a National Security Concern?
Another San Diego congressman is raising national security concerns over the potential hostile takeover of Qualcomm by rival chipmaker Broadcom.
Democrat Scott Peters has joined Republican Duncan Hunter in calling for a U.S. government review of the $117 billion bid.
John Cornyn of Texas, the No. 2 ranking Republican in the Senate, also sent a letter to Treasury Secretary Steven Mnuchin seeking a probe by the Committee for Foreign Investment, a multi-agency body, which can block sales of U.S. companies to foreign firms over national security concerns.
Broadcom, based in Singapore, hopes to take control of Qualcomm's board of directors to push through its $79 per share buyout, which Qualcomm's board rejected.
Qualcomm shareholders will vote for either its existing board or Broadcom's alternative candidates at its annual meeting March 6.
Broadcom has pledged to move its corporate headquarters to the U.S. ahead of a potential Qualcomm acquisition -- which could allow it to sidestep scrutiny from CFIUS. The U.S. Federal Trade Commission would still have to approve the deal, however.
Broadcom announced the relocation during a ceremony in November at the White House with President Trump. Broadcom shareholders must sign off on its move, which is expected by May 6.
Peters said Qualcomm is the leading American company in the race to roll out ultra-fast 5G mobile networks. An acquisition by Broadcom could slow down that work, handing 5G leadership over to Chinese and Korean firms.
"In the national security space, for instance, we do a lot to make sure we have ship building capabilities onshore," said Peters. "We have shipbuilders that we give contracts to just so we have that expertise. It seems even more critical that we hold onto this (5G) expertise by protecting Qualcomm from a foreign takeover."
Peters requested that Mnuchin provide a classified report to intelligence committees in the House and Senate assessing the national security implications of a Broadcom takeover of Qualcomm.
If Broadcom succeeds in gaining control of Qualcomm's board, Peters called for a CFIUS review.
Hunter also wants CFIUS to look into the potential takeover.
"Qualcomm has critical intellectual property that is important to communication capability, and it must be protected," Hunter said in a statement. "In previous mergers, Broadcom has a clear history of initiating layoffs, and the economic ramifications for San Diego could be devastating; we must protect these jobs and national security."
Cornyn raised concerns about foreign firms gaining control of U.S. companies through hostile proxy fights without an examination by CFIUS.
"The United States is currently in a race with China in the development of 5G technologies, a race that will have profound impact on critical U.S. telecommunications infrastructure and U.S. national security for decades to come," wrote Cornyn. "Qualcomm is the only U.S. company that is currently capable of leading 5G development."
Reuters reported earlier this week that CFIUS had begun to look at the possible takeover of Qualcomm, citing unnamed sources. An email to CFIUS was not returned. A Qualcomm spokeswoman declined to comment.
Qualcomm's shares shed 2 percent Wednesday to close at $65. Broadcom's shares also dipped 2 percent to $246.46. Both companies trades on the Nasdaq.
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Image credit: Broadcom/Artist's concept.
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