National security review delays Qualcomm shareholder meeting on Broadcom takeover

U.S. chipmaker Qualcomm is delaying a major shareholder meeting this week so federal regulators can review whether a hostile takeover bid from foreign technology giant Broadcom poses a national security threat.

The Committee on Foreign Investment in the United States urged Qualcomm on Sunday to postpone its annual stockholders meeting and election of its board of directors by at least 30 days to allow for the review of the deal.

It’s the latest twist in the months-long fight between the two companies, as Qualcomm tries to fight off Singapore-based Broadcom’s takeover bid. If the deal goes through, it would be the largest tech acquisition in history.

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The Committee on Foreign Investment in the United States has ramped up its scrutiny of potential foreign forays into the U.S. market in recent months, but such an overt intervention is unusual for the panel.

Broadcom said in a statement Monday morning that it learned Qualcomm had secretly filed a complaint with the committee asking for the review. It accused the company of seeking to “disenfranchise its own stockholders.”

“This was a blatant, desperate act by Qualcomm to entrench its incumbent board of directors and prevent its own stockholders from voting for Broadcom’s independent director nominees,” the statement said.

Broadcom is currently in the process of moving its headquarters from Singapore to the U.S., a move intended to ease the concerns of regulators. That decision was announced in November when the head of the company joined President Trump at a White House event.

The company said in its statement Monday that once it completes the shift to the U.S., the committee will no longer have jurisdiction over the deal.

In its own statement, Qualcomm called Broadcom’s response “a continuation of its now familiar pattern of deliberately seeking to mislead shareholders and the general public by using rhetoric rather than substance to trivialize and ignore serious regulatory and national security issues.”

“[The Committee on Foreign Investment in the United States] has determined that there are national security risks to the United States as a result of and in connection with the transaction proposed by Broadcom,” Qualcomm’s statement added.

The committee is an inter-agency panel chaired by Treasury Secretary Steven Mnuchin and comprised of Cabinet officials from the Justice Department and State Department, among others. The committee is tasked with investigating the national security implications of foreign bids for American businesses.

The Qualcomm review comes as regulators have stepped up their scrutiny of foreign overtures into the U.S. market, with Chinese tech moves drawing the biggest concerns.

Last month, Xcerra, a Massachusetts technology company, called off a proposed sale to an investment fund backed by the Chinese government, saying that it had become clear that the committee would not approve the deal.

The panel also successfully torpedoed the Alibaba Group’s $1.2 billion bid to acquire MoneyGram in January, elevating trade tensions between China and the U.S.

Lawmakers and intelligence officials have also warned consumers and U.S. business about the Chinese telecom provider Huawei, which they suspect is susceptible to influence from Beijing.

Sen. Tom Cotton (R-Ark.), who has been an outspoken critic of Huawei and its efforts to break into the U.S. market, applauded Monday’s decision. He argued that the U.S. chip-making giant’s operations should be protected by regulators.

“Qualcomm’s work is too important to our national security to let it fall into the hands of a foreign company-and in a hostile takeover no less,” Cotton said in a statement. “It’s hard to see a good reason why we should hand over one of our leading computer-chip makers, and thereby give Chinese companies a leg-up in the race to develop 5G and the next generation of technology. Better to keep it in American hands and protect American national security.”

This story was updated at 2:57 p.m.