U.S. President Donald Trump announced on Monday to block Broadcom Ltd. (NASDAQ: AVGO) takeover attempt for chipmaker, Qualcomm Inc. (NASDAQ: QCOM) over concerns of national security issues. Qualcomm shares were trading 5.1 percent lower after the opening bell on Tuesday.
Broadcom has been aggressively bidding to take over Qualcomm for its chipmaking segment. If the acquisition was successful, Broadcom would have been able to push out its 5G technology even faster than anticipated.
Qualcomm previously rejected Broadcom’s highest bid of $121 billion, before the bid was lowered to $117 billion in February, after Broadcom said that Qualcomm does not value its shareholders interest. It was then brought to Broadcom’s attention that Qualcomm had secretly filed a request with the Committee on Foreign Investments in the United State (CFIUS) to launch an investigation, resulting in a delay of Qualcomm’s annual meeting.
Sources familiar with the matter previously said that Qualcomm does sensitive work for the U.S. government, which concerns lawyers and officials saying that Broadcom could sell parts of Qualcomm to weaken the U.S.’s race to 5G technology.
Qualcomm expressed doubts of the acquisition already when Broadcom was repeatedly changing the offer due to national security concerns, citing the fact that many Chinese acquisition attempts were blocked the U.S.
Broadcom released a statement shortly before Trump blocked the offer saying that if the two companies did merge, that the headquarters could relocate to the U.S., instead of the current Broadcom headquarters in Singapore.
Qualcomm had also been hesitant in the offer because of its acquisition attempt for NXP Semiconductors. Qualcomm had been actively pursuing the semiconductor manufacturer, but if Qualcomm accepted Broadcom’s bid, it would force the company to drop its bid for NXP. The deal between Qualcomm and NXP is nearing.
If the merger between Broadcom and Qualcomm was successful, it would have been the largest technology merger.
The Trump administration isn’t solely concerned about foreign technology-based companies. Previously, the administration blocked China’s Ant Financial Services Group takeover attempt for MoneyGram International Inc. CFIUS did not provide details on the matter.