Qualcomm Delays Shareholder Meeting After CFIUS Order

(Bloomberg) -- Qualcomm Inc. postponed a key investor vote in the hostile takeover battle with rival chipmaker Broadcom Ltd., after the powerful Committee on Foreign Investment in the U.S. started investigating the proposed combination and ordered a delay.

The meeting, scheduled for Tuesday, will be pushed back for at least 30 days, Qualcomm said. That throws up a major roadblock for Broadcom's $117 billion bid, since shareholders were scheduled to vote on six director nominees proposed by the Singapore-based company, potentially giving it a majority on Qualcomm's board. 

Qualcomm Inc. shareholder T. Rowe Price Group Inc. submitted an early vote in favor of Broadcom Ltd.'s board nominees, according to a person familiar with the investor's action.

T. Rowe voted for all six of Broadcom's nominations, a move which, if followed by enough other shareholders, would give the bidder control of the 11-person Qualcomm board that has so-far shunned the approach. T. Rowe's vote and stance could change in the run up to a meeting, said the person who declined to be identified because the voting is not yet public.

The order for a delay by the government panel is unusual, since CFIUS doesn't usually investigate before a merger is agreed. But deals involving foreign companies, especially those of sensitive U.S. technology like semiconductors, have come increasingly under the spotlight recently. Broadcom's ties to China's largest telecom equipment maker, Huawei Technologies Co., has already raised concerns (although Qualcomm also works with Huawei.)

President Donald Trump last year blocked a Chinese-backed takeover of Lattice Semiconductor Corp. because of the importance of semiconductors to the U.S. government and China's role in the proposed acquisition.

Broadcom slammed Qualcomm's decision to “secretly” file a voluntary request with CFIUS to start an investigation, labeling it a “blatant, desperate act” to entrench its incumbent board of directors. Qualcomm shot back that Broadcom's claims that the CFIUS inquiry was a surprise to them has “no basis in fact.” Broadcom has been interacting with CFIUS for weeks and made two written submissions, Qualcomm said.

Qualcomm shares were down 1.2 percent to $63.95 at 12:36 p.m. in New York. Broadcom was little changed at $250.

“Time is up for Qualcomm and it's a question of when,” said Nomura Instinet analyst Romit Shah, speaking on Bloomberg TV. “When this vote ultimately comes through I think the holders are going to replace this board.”

CFIUS, which conducts its reviews far from the public eye, was split on whether to review Broadcom's increasingly hostile effort to win control of its rival, Bloomberg reported last week. San Diego-based Qualcomm, fighting to stay independent, has repeatedly warned an acquisition would face regulatory scrutiny.

Qualcomm and Broadcom are two of the biggest makers of components that are crucial to modern communications systems, including fixed-line and mobile. Qualcomm's technology is in every smartphone and Broadcom makes a crucial part of machines that direct the flow of information in data centers making their capabilities an area of interest for security.

Hock Tan, Broadcom's chief executive officer, joined Trump in the White House last year to announce he was moving Broadcom's headquarters to the U.S. from Singapore — a move that appeared designed to appease U.S. officials and facilitate future acquisitions. 

Once Broadcom re-domiciles — currently planned for no later than May 6 — the takeover would not be a CFIUS covered transaction, Broadcom said in the statement.

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net.

To contact the editors responsible for this story: Robert Fenner at rfenner@bloomberg.net, Molly Schuetz, Alistair Barr

©2018 Bloomberg L.P.