WASHINGTON – A national security panel that can stop mergers that could harm U.S. security has begun looking at Singapore-based chipmaker Broadcom Ltd’s plan to take over rival Qualcomm Inc, according to three sources familiar with the matter.
CFIUS, an opaque inter-agency panel, has been in touch with at least one of the companies in the proposed merger, one source said, and met last month to discuss the potential merger of the two big semiconductor companies, according to two sources familiar with the matter.
Senator John Cornyn, the No. 2 Republican in the Senate, urged Treasury Secretary Steven Mnuchin on Monday to have the Committee on Foreign Investment in the United States, or CFIUS, officially review the proposed transaction before a key shareholder vote expected on March 6, according to a letter seen by Reuters.
The pre-deal discussions by CFIUS — which are extremely rare — suggest Broadcom’s plans to move its headquarters to the United States before it completes its proposed purchase of Qualcomm may not be enough to sidestep a national security review that could threaten the deal.
Part of the CFIUS’ current concern, which is echoed in Cornyn’s letter, could lie in the fact that Broadcom has failed to strike a deal with Qualcomm and has resorted to what is essentially a hostile takeover by putting forward a slate of six Broadcom nominees for Qualcomm’s 11-member board.
If the six are elected on March 6, the vote would give control of Qualcomm to Broadcom’s nominees. That would happen before a CFIUS review or antitrust review is complete.
“I urge CFIUS to promptly review Broadcom’s proposed acquisition of control of Qualcomm’s board, and to act prior to the March 6 Qualcomm meeting to address any national security concerns that may be identified,” Cornyn wrote to Secretary Mnuchin, according to the letter, a copy of which was seen by Reuters.
A spokesman for CFIUS declined to comment. Representatives for Cornyn were not immediately available for comment.
A CFIUS review in itself does not mean a deal will be halted. CFIUS, under former President Barack Obama and current President Donald Trump, has soured on high tech deals, particularly involving semiconductors, or involving sensitive information about American citizens… – Reuters