Broadcom plans shareholder vote to become US company, could sidestep CFIUS investigation into Qualcomm takeover
Singapore-based Apple supplier Broadcom on Friday said it will this month ask shareholders for approval to redomicile to the U.S., potentially threatening a U.S. national security panel investigation into the company's unrelenting hostile pursuit of American chipmaker Qualcomm.
Broadcom said it will convene a special shareholder meeting on March 23 to decide the redomiciliation, which the firm expects to complete by May 6, reports The Wall Street Journal. If shareholders agree, the Singapore Court will then need to approve the move.
The upcoming vote is the result of a Singapore court hearing on Friday that "directed" Broadcom to hold the meeting, according to a Securities and Exchange Commission filing. That court hearing was requested by Broadcom on March 6 after the Committee on Foreign Investment in the United States (CFIUS) decided to investigate the Qualcomm takeover, citing national security risk.
As noted in the report, a previously undisclosed CFIUS filing from March 4 orders Broadcom to give the body five business days' notice before taking action to redomicile. The pending shareholder vote raises questions as to whether Broadcom breached the directive.
"We are aware of the terms in the order and are in full compliance," a Broadcom representative said.
The CFIUS order was revealed in a Qualcomm SEC filing on Sunday that stipulated the company delay a shareholder meeting by 30 days as the panel assesses national security risks. Thought to be at issue are six directors Broadcom nominated to join Qualcomm's 11-member board, a move designed to force negotiations between the two companies, according to Reuters.
If Broadcom becomes a U.S. company, the CFIUS investigation might be nullified as the firm would effectively exist outside of the panel's jurisdiction. On the other hand, the CFIUS could order the review to continue since it began when Broadcom was a Singapore entity, the WSJ said.
Broadcom accused Qualcomm of sparking the investigation by surreptitiously filing an investigation request, calling it a "blatant, desperate act."
The U.S. panel is concerned that a Broadcom takeover will weaken Qualcomm's standing in the semiconductor industry. Broadcom's ties with foreign entities are also a source of unease.
"Given well-known U.S. national security concerns about Huawei and other Chinese telecommunications companies, a shift to Chinese dominance in 5G would have substantial negative national security consequences for the United States," the CFIUS said in a March 5 letter, according to the WSJ.
Interestingly, Intel might intercede with its own bid for Broadcom if that company's attempt at Qualcomm gets close to succeeding. The move would be defensive, as a combined Broadcom and Qualcomm entity would pose a serious threat to Intel's market dominance, sources claim.