The US government has ordered the microchip giant Qualcomm to postpone a crucial shareholder vote on its $142bn (£103bn) sale of the company to Singapore rival Broadcom, citing national security concerns.
The SEC has cleared Broadcom's preliminary proxy statement.
Qualcomm fired back accusing Broadcom of trying to mislead shareholders and "trivialize" U.S. regulatory and national security issues. "A disruption of Qualcomm's R & D efforts would in effect hand the growing competition for 5G to China".
In addition, Qualcomm claims that the investigation is no surprise to Broadcom, which has been in communication with the USA agency "for weeks" and has made two written submissions to CFIUS itself.
Broadcom said in November that it would return to the United States but did not say when the move would happen. The company said it recognizes "the important role CFIUS plays in protecting our national security, and is fully committed to cooperating with CFIUS in any review".
CFIUS's main responsibility is to determine the national security implications of any proposed acquisitions by a foreign party that would result in control of a U.S. business.
Qualcomm's shareholder meeting was set to include a vote on whether to replace six of its 11 directors with nominees put forward by Broadcom.
Broadcom's hostile takeover bid for chip-making rival Qualcomm has become even more hostile now that a USA national security agency over the weekend ordered Qualcomm to delay a shareholder vote scheduled for March 6 that would have set the direction of the proposed $117 billion deal. Broadcom has accused Qualcomm of failing to negotiate seriously, saying they were involved in "engagement theater".
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CFIUS is chaired by the U.S. Treasury Secretary and includes representatives for the U.S. Departments of Justice, Defense, Homeland Security, Energy and State.
Qualcomm officials said that notwithstanding Broadcom's dismissive rhetoric, "this is a very serious matter for both" companies.
Prior to Gallagher's letter, Sen.
Broadcom noted in its statement that it has "committed" to redomiciling in the United States, that the process is "well underway" and that Broadcom (currently based in Singapore) expects to be a USA -based firm by the end of its second fiscal quarter on May 6, 2018. John Cornyn, R-Texas, and local Reps.
The company's hostile takeover attempt has come at a vulnerable time for Qualcomm, which has been embroiled in a long-running legal dispute with Apple and is facing several large fines from governing bodies across the globe, including a $1.23 billion fine recently levied against the company for breaking the European Union's antitrust laws. Any Broadcom candidates elected would be required to act in the best interest of Qualcomm and its shareholders.
In a February 26 letter to Treasury Secretary Steve Mnuchin, Rep. John Cornyn, R-Texas, the second-ranking Republican in the House of Representatives, asked Mnuchin to have CFIUS get involved given not only that a China-based company was trying to buy an American entity, but that it was doing so through a hostile takeover.
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