Federal Regulators Ask Qualcomm To Postpone Broadcom Bid Vote
UPDATE: 12:30, Tuesdy, March 6, 2018
Qualcomm released a statement on when the Annual Stockholders Meeting will adjourn.
Qualcomm Incorporated (NASDAQ: QCOM) today announced that it is delaying the business of its 2018 Annual Meeting of Stockholders pursuant to an Interim Order received on March 4, 2018 from the Committee on Foreign Investment in the United States (CFIUS). To implement this change, the 2018 Annual Meeting of Stockholders will be opened on March 6, 2018 at 8:00 a.m. Pacific Time and immediately adjourned to April 5, 2018. There will be no voting or other matters conducted at the meeting .The Annual Meeting will be reconvened on Thursday, April 5, 2018 at 8:00 a.m. Pacific Time at the Irwin M. Jacobs Qualcomm Hall, 5775 Morehouse Drive, San Diego, California, 92121. The record date remains unchanged – stockholders of record on January 8, 2018 will be entitled to vote at the meeting. Stockholders who have previously cast their votes do not need to vote again unless they want to change their vote.
Qualcomm also made public a letter from The Department of The Treasury which gives insight into the nature of the CFIUS investigation. The letter cites concerns over Broadcom's relationship with foreign entities and the standardization of 5G technology, among other things.
Read original story.
Federal regulators have ordered San Diego-based Qualcomm to postpone a stockholders vote on whether to sell the company to rival chip maker Broadcom, due to national security concerns raised by several members of Congress.
The vote was set to take place Tuesday at Qualcomm's annual shareholders meeting. But a half-dozen lawmakers called for a review of Broadcom's $79-per-share, roughly $117 billion hostile takeover bid, including Republican Rep. Mike Gallagher of Wisconsin, who said a Broadcom takeover would give a foreign company "visibility into the sensitive work that Qualcomm performs on behalf of the U.S. government."
Gallagher also said a disruption of Qualcomm's research and development efforts "would in effect hand the growing competition for 5G to China."
Qualcomm's shareholder vote will now be delayed at least a month as the Committee on Foreign Investment in the U.S. investigates Broadcom's proposed deal.
"TheCFIUS issued an interim order to Qualcomm directing it to postpone its annual stockholders meeting and election of directors by 30 days," said a spokesperson from the U.S. Department of the Treasury, which chairs the interagency regulatory committee. "This measure will afford CFIUS the ability to investigate fully Broadcom's proposed acquisition of Qualcomm."
In dueling statements, Broadcom officials claimed the investigation was undertaken at Qualcomm's request without their knowledge, while Qualcomm officials said the suggestion that the CFIUS investigation was coming as a surprise to Broadcom "has no basis in fact."
"Broadcom has been interacting with CFIUS for weeks and made two written submissions to CFIUS," the Qualcomm statement said.
Broadcom, which has put forward six candidates in order to take over the majority of seats on Qualcomm's 11-member board, called the CFIUS investigation 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."
"It is critical that Qualcomm stockholders know that Qualcomm did not once mention submitting a voluntary notice to CFIUS in any of its interactions with Broadcom to date," the Singapore-based company said in its statement. "This can only be seen as an intentional lack of disclosure, both to Broadcom and to its own stockholders. This brings Qualcomm's 'engagement theater' to a new low."
Qualcomm officials countered that the Broadcom response "is 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 Qualcomm statement said CFIUS is an independent governmental body charged with protecting U.S. national security and "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. In compliance with the CFIUS order, Qualcomm will delay its annual meeting of stockholders and election of directors for at least 30 days so that CFIUS can fully investigate Broadcom Limited's proposal to acquire Qualcomm."
Qualcomm officials said that notwithstanding Broadcom's dismissive rhetoric, "this is a very serious matter for both" companies.
Five other members of Congress signed the Gallagher letter on Friday that was sent to Treasury Secretary Steve Mnuchin.
"We cannot overstate the likely harm that would result to Qualcomm, the U.S. company leading the development of 5G and other next-generation technologies, as well as to United States security interests," the letter said.
Prior to Gallagher's letter, Sen. John Cornyn, R-Texas, and local Reps. Scott Peters, D-San Diego, and Duncan Hunter, R-Alpine, had called for a review of the deal, the San Diego Union-Tribune reported.
Broadcom is incorporated and currently based in Singapore, but CEO Hock Tan announced late last year while visiting President Donald Trump at the White House that the company would return its corporate headquarters to the U.S., likely using San Jose as a base.
Buying Qualcomm would make Broadcom the third-largest chip maker, behind Intel Corp. and Samsung Electronics Co. The combined business would become the default provider of a set of components needed to build each of the more than one billion smart phones sold every year.
The company's hostile takeover attempt has come at a vulnerable time for Qualcomm, which has been embroiled in a long-running legal dispute with Apple and is facing several large fines from governing bodies across the globe, including a $1.23 billion fine recently levied against the company for breaking the European Union's antitrust laws. Qualcomm said it would challenge that fine.
San Diego State University Finance Profesor Dr. Nikhil Varaiya says the Qualcomm is so vulnerable an aquisition may work in stockholders' favor.
“If I am a stockholder who’s been holding shares for the last five years that have not moved much and the dividend yields are miniscule they are asking the question “should we not vote with Broadcom and wait for qualcomm to raise the stocks to 100 dollars a share?”
If Broadcom is ultimately successful in its takeover attempt, the impact on San Diego could be severe. Qualcomm is one of the few major corporations with a global reach to be headquartered in a city known mainly for tourism, and smaller defense and life-sciences firms.
Qualcomm is one of the region's largest private employers, and the family of co-founder Irwin Jacobs is one of the area's most generous philanthropists.
>> I am Maureen Cavanaugh. It is Tuesday, March 6. Our top story on midday edition QUALCOMM says the new date for its annual shareholders meeting is now April 5. The San Diego tech giants is a pushback meeting because of a request by government committee. >> Before the postponement today was the day that shareholders were to decide on a takeover build bid by Singapore-based.com. But concerns have been raised about the national security implications of a foreign company gaining access to QUALCOMM's advances in the next generation of wireless technology. >> So a little-known USA agency called the committee on foreign investment in the United States or city is will conduct an investigation into the proposed takeover. >> It is a move that has been championed by several members of Congress from San Diego. Including representatives got peters, who joins us now and Congress and national Congress in peters, welcome. >> Begin having. You made it case in a recent editorial why you believe rock him should not acquire QUALCOMM. Can you give us the highlights of your argument? >> Sure pair. Well United seven interest in keeping a leader in this technology. It is technology that QUALCOMM develops. Around 5G technology, around the way that devices talk to each other. Both because it is a critical infrastructure, and it's a critical technology for defense. So before we give this or allow someone to acquire this who may be hostile, we ought to take a pause and make sure that we know we are keeping this unsure if it's appropriate. And giving you the analogy of a shipyard. We don't just develop Navy shipbuilding to the lowest bidder, which may have to come from Korea. With a conscious decision to retain that expertise on shore so that places like NASCO, down in the South Bay and [ Indiscernible ] and BA systems know how to build the ships and we don't have to rely on the adversaries for that technology. >> The same thing is true the kinds of things that QUALCOMM is developing which really are important for the next generation just in. >> Now brought, is based in Singapore now, it says it intends to relocate its headquarters to the US if the deal goes through. What that make it an American company subject to US security laws? >> It is interesting argument. I still don't know what ties would be retained through China or their allies, and frankly we are pretty good about letting people here and not controlling what they do. I think that's why this review by CPS is still welcome for these people are potentially seated on the Board of Directors at QUALCOMM. Let's find out it's ugly what safeguards need to be imposed. But just today, the department treasury says it's this hostile takeover attempt can pose a national security risk. I don't think the people involved are dangerous to us. And necessarily moving where they spend most of the time makes a difference. >> How much of your push and the push in general for a city's review, is actually an effort. Just to try to keep QUALCOMM in San Diego? >> Well QUALCOMM is the largest private employer. So I don't think it's a secret that [ No Audio ] it make sense for me to be one of the people that speaks about this. [ Indiscernible ] on the -- [ Audio cutting out ] arm service committee as a leader on this. >> [ Audio cutting out ] similar security concerns within the tech community about this potential takeover. >> I talked to executives at some Western wireless technology company who share the same concerns that US government does. Those concerns are that China has had start, it looks like they have had start in developing the next generation wireless technology. It's called 5G and it's supposed to be fast enough to enable self driving cars and other technologies in the near future. >> The worry is that China might have widespread 5G well before the US or years before it does. >> And the problem with that is that China can then recruit the top engineers because they will have self driving cars before the US, so where would they go as China. And they were that Western companies will the talents if it happens. >> Tell us more about safety is, the committee of foreign investment in the US. I don't think a lot of people have heard about this committee what is its main function? To be honest, I hadn't even heard of it until couple months ago. It's a secretive committee that is headed by the Treasury Department but also includes officials from other administrations or department branch like home and security or energy. >> Is mean unction is to review any merger by a foreign company or US company or a US company on national security grounds. >> Now before this whole rock,/QUALCOMM intervention, they seem to be pretty narrow definition of when it can intervene. It usually does intervene until it deals already made, but was interesting about the QUALCOMM deal is even before.com meeting move, made the move to control QUALCOMM. >> And can see if he is give the final thumbs-up or thumbs down on a deal like this? >> CPS will conduct an investigation that will make a recommendation to President. Trump who ultimately has the power on whether to prohibit the spread of action. >> This could create an interesting situation because the CEO of broadcast abroad come with abroad come see you called him a great guy and.com would be very good for doing something like this. >> The national security concerns abroad come says it's looking to move its headquarters to the US. So is at the basis of the inquiry sort of a moot point? >> That's another interesting question. So last week the treasury secretary shared a meeting of SYPHIS where they made a decision . The treasury secretary said hey because of this and a couple of issues, I don't know whether I have jurisdiction to intervene in this deal. But what some of the other officials said is that hey any foreign company can say we are going to relocate our headquarters to the US, and avoid this entire process. So that's one question that SYPHIS has debated right now. So that's the argument that many cities or are giving right now. Anybody can say this, so why not and it's potential for takeover so why not intervene. >> On getting back to the more usual way these things work, QUALCOMM's annual shareholders meeting has been public postponed until April 5 while the three while the 310 mashed SYPHIS review is being made. But I'm wondering about all this with the review itself how it will influence shareholders. >> So some shareholders have already cast their vote. It is a log. They can change their votes at any moment. One possibility is that broad come make see hey the government is not going to make this easy. Let's not through this. >> On the other hand shareholders are looking at the price that through this. >> On the other hand shareholders are email@example.com is offering for QUALCOMM and they may try to force it through even if it's going to result in a very long regulatory process for the merger. >> If SYPHIS says the deal can go through or some form of SYPHIS that has the authority to do that , says the deal can go through, what kind of message does that send to other businesses? >> That's a great question. I'm not in a position to answer that. One thing that is happening is that Congress numbers are considering ways to expand SYPHIS's powers. But when I can't say this can be the first of not many, but it will be the first of other similar interventions in the business world. >> I have been speaking with [ Indiscernible ] reporter with the Wall Street Journal. And Stu, thank you so much. >> Thank you for having me. >> In the interest of full disclosure, QUALCOMM cofounder Erwin Jacobs is a financial supporter of KPBS.