Republican lawmakers back review of Broadcom's Qualcomm bid

Citing security Republicans support CFIUS review of Broadcom bid for Qualcomm 0

However, Qualcomm has been resisting Broadcom's overtures, prompting the latter to nominate six directors to Qualcomm's 11-member board at its shareholder meeting.

The company said Wednesday that it expects the move to be completed by May.

In the letter, Treasury officials said many of its national security concerns surrounding the potential takeover are classified.

Those opposed to Broadcom's $117 billion bid for Qualcomm say it would put the U.S.at a disadvantage in the 5G race against China, and potentially create national security issues.

"CFIUS 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", it said. The convoluted claim, related to a Department of Treasury letter, is that if Broadcom buys Qualcomm, then China will fill a theoretical void left by Qualcomm no longer being a US company. Broadcom shareholders are expected to vote on the move in early May.

Broadcom used to also be a US company until it relocated to Singapore in 2015 for tax purposes, and it is in the process of reincorporating in the U.S. "Broadcom will not only maintain the R&D resources Qualcomm devotes to 5G and innovation in future wireless standards - we will also focus R&D spend to those critical technologies that are essential to the U.S".

The letter raised red flags about a Broadcom takeover possibly weakening Qualcomm long-term competitiveness in telecommunications technologies and standard setting - opening the door for Chinese companies such as Huawei to become dominant players in upcoming 5G networks.

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Reuters reported last week that CFIUS had begun looking at Broadcom's bid amid growing pressure from lawmakers, including President Donald Trump's fellow Republicans in Congress.

The moving "process is well underway" and accused Qualcomm of secretly scuttling the takeover effort by appealing to CFIUS, Broadcom insists.

San Diego-based Qualcomm has emerged as one of the biggest competitors to Chinese companies, such as Huawei Technologies, vying for market share in the sector.

The investigation by CFIUS, which considers national security risks to foreign acquisitions of U.S. companies, came after Qualcomm filed a notice with the panel seeking a review. It lends weight to Qualcomm's argument that the hostile bid would struggle to get regulatory sign-off.

The risks of the potential deal "warrant a full investigation".

The panel also advised against a deal between Chinese-backed private equity firm Canyon Bridge and US chipmaker Lattice Semiconductor Corp, leading president Trump to block the proposal in September 2017.

Ultimately, the CFIUS will look at the deal from a national security standpoint.

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