SAN FRANCISCO — President Trump has blocked Singapore-based Broadcom’s proposed $117 billion takeover of U.S. chipmaker Qualcomm for national security reasons.
In the order released Monday night, Trump cited “credible evidence” that the takeover “threatens to impair the national security of the United States.”
Coming just hours after Broadcom CEO Hock Tan met with security officials at the Pentagon in an effort to save the deal, the order follows an investigation by the Committee on Foreign Investment in the United States, which reviews purchases of American companies by foreign investors. The investigation recommended blocking the deal, citing national security risks.
Broadcom has pursued a tie-up with its fellow chip maker for months. The takeover, which would have been the largest transaction the technology industry had ever seen, was tripped up by concerns that it posed a threat to American competitiveness in mobile technology by putting one of the largest mobile chip makers in the U.S. under the control of a company based in Asia.
If research and development at Qualcomm foundered under Broadcom, the administration was concerned China-based Huawei Technologies would have an opening to become an even bigger player in the booming market of producing chips that power smartphones, smart home gadgets and other mobile devices.
Broadcom said in a statement that it is reviewing the presidential order. “Broadcom strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns,” the company said.
Currently based in Singapore, Broadcom is in the process of relocating its legal headquarters to the United States in an effort to assuage those concerns. Trump hosted Tan in the White House last year as he announced the move to the U.S. planned for April.
Under the presidential order, Qualcomm must hold its annual stockholder meeting at the earliest possible date, which is March 23, based on the required 10-day notice, Qualcomm said Monday night. Also under the order, all of Broadcom’s candidates for Qualcomm’s board of directors are disqualified.
This isn’t the first time on President Trump’s watch that a deal by a foreign buyer has been scrapped after review by the Committee on Foreign Investment in the United States, or CFIUS. Moneygram’s sale to Alibaba’s Ant Financial and Lattice Semiconductor’s sale to an investment firm with reported ties to the Chinese government also were blocked, underscoring the protectionist posture of the Trump administration.
Intel had been exploring a possible bid for Broadcom since late last year, the Wall Street Journal reported Friday.
In a research note Monday before the president’s order was announced, Angelo Zino, senior industry analyst at CFRA Research, cast doubt on such a deal, deeming it “highly unlikely to transpire.”
Broadcom, which reports earnings Thursday, will likely “exceed consensus expectations,” he said. Zino has a “strong buy” on Broadcom shares.
Broadcom dropped 1% in after-hours trading to $260. Shares have risen 7% over the last six months, while the Nasdaq Composite index has risen about 17%.
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