Banks face millions in lost fees as Trump blocks Qualcomm takeover

Banks face millions in lost fees as Trump blocks Qualcomm takeover

President Donald Trump has blocked a planned takeover of the Qualcomm chipmaker by the Singapore-based rival Broadcom over national security. Had Broadcom purchased it, CFIUS says the acquisition could have led to the US falling behind and China leaping ahead in the race to influence the infrastructure that will connect everything from phones to a network of self-driving cars.

The US Treasury Department warned in a letter made public in early March that since Broadcom was financing the deal with over $100 billion in debt, it would be under pressure to squeeze more profits out of Qualcomm.

And for Qualcomm: It got what it wanted-it's been trying to resist the takeover ever since Broadcom launched it.

Qualcomm has been maneuvering for weeks to rebuff Broadcom's unwanted advances, and had asked CFIUS to look into national security implications of a merger. The US government is anxious that Broadcom would slowdown Qualcomm's 5G R&D spending, a move that would solidify Huawei's lead and favor China.

Qualcomm, which is the dominant maker of microprocessors for smartphones, had rejected the unsolicited offers from Broadcom, which makes an array of chips for wireless communications, set-top boxes and electronic displays.

The computer chip makers must "immediately and permanently abandon the proposed takeover", Trump said in a presidential order on Monday.

Being based in the United States as opposed to Singapore will allow Broadcom to make what it believes will be acquisitions of US companies that will not fall within the jurisdiction of the Committee on Foreign Investment in the United States (CFIUS), which scrutinizes deals for potential national security concerns.

Trump Blocks Biggest Tech Deal In History Over National Security Risks
The decision came despite Broadcom's pledge to keep the USA a leader in 5G cellular in a response to the CFIUS letter last week. This isn't the first time that President Trump has used his power to block foreign investment into a USA company.

Analysts said Broadcom can still build heft through smaller deals and could have an easier time buying United States targets if it goes through with plans to redomicile in the US.

Born in 2005 following the private equity acquisition of what was Agilent's Semiconductor Products Group, Avago bought Broadcom in 2016 and assumed that company's name.

The company initially intended on trying to change the order, saying that it did not agree with the USA government's belief that US national security was at risk if the acquisition was permitted, but it was short-lived.

Broadcom said earlier this year it would fully be a USA domiciled company by May 6.

In a statement, Treasury Secretary Steve Mnuchin supported the United States government's decision, noting that the "decision is based on the facts and national security sensitivities related to this particular transaction only".

Broadcom has been pursuing Qualcomm for quite some time now.

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