Trump Blocks Broadcom, Qualcomm Merger Citing National Security Concerns

Trump blocks Broadcom from acquiring Qualcomm

Trump blocks Broadcom from acquiring Qualcomm

The tech giant saw its plan to complete the largest merger in the history of the technology industry come to a halt on Monday evening after President Trump stopped the deal from happening based on the advice provided by the Treasury Department's Committee on Foreign Investment in the United States, with the development marking an end of a four-month saga that recently seized its first executive victim - Dr. Paul E. Jacobs, son of Qualcomm co-founder Irwin M. Jacobs who was removed from the position of Executive Chairman. Mr Tan has already turned Avago, a small chipmaker with a market value of $3.5bn in 2009, into a more than $100bn company.

Intel was previously said to have pondered intervening in the deal if it went through by bidding for Qualcomm but it's now unlikely to make any moves even if it wouldn't be subjected to the same level of regulatory scrutiny as Broadcom was by virtue of the fact that it's an American company. "He buys franchises, things that he believes have competitive modes, long visibility on revenues, opportunities for operational improvements".

Broadcom had planned since previous year to relocate its legal headquarters to the United States, avoiding the need for a CFIUS review. Qualcomm shares fell 4.3 percent.

Broadcom is still seeking major mergers and acquisitions and isn't likely to change course due to the failure of its attempt to seize control of Qualcomm, according to a number of analysts interviewed by Reuters.

San Diego-based Qualcomm evolved from a US military aerospace contractor to become the dominant player in wireless radio technology over the past two decades, with its chips used in half of all smartphones.

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Qualcomm's dominance of baseband chips that connect phones to networks would have represented the crown jewel in Broadcom's portfolio of communications chips that supply wi-fi, graphics, video and networking features alongside baseband chips.

Broadcom has ample firepower for smaller deals, with about $11 billion in cash and the potential to generate almost $9 billion in annual free cash flow, analysts estimate.

Mellanox was not immediately available for comment.

Before Trump's order, Broadcom had planned to relocate its legal headquarters to the United States, avoiding the need for a CFIUS review.

The Committee on Foreign Investment in the United States (CFIUS), which raised concerns about the Qualcomm deal with Trump, listed the highly leveraged nature of Broadcom's bid for its larger rival as a major concern coupled with the risk of the US losing mobile technology leadership.

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