3-5-18 7:27 AM EST | Email Article
By Stu Woo 

The U.S. government ordered chip maker Qualcomm Inc. to delay its shareholder meeting this week to provide it more time to review rival Broadcom Ltd.'s proposed $117 billion takeover of the chip maker.

The move represents a highly unusual intervention by Washington, and will delay Broadcom's proxy fight for control of Qualcomm's board. Qualcomm's shareholders were set to vote on whether to replace six of its directors with nominees put forward by Broadcom.

Qualcomm, based in San Diego, has so far spurned Singapore-based Broadcom's takeover offer, forcing Broadcom to go hostile in its pursuit.

In a statement early Monday, Broadcom said that Qualcomm requested a U.S. government review that will delay the Qualcomm shareholder vote. That vote was slated for Tuesday.

Broadcom said it learned of Qualcomm's request on Sunday night, and that Qualcomm had not disclosed its request in its interactions with Qualcomm.

The Committee on Foreign Investment in the U.S., known as CFIUS, will review the merger, Broadcom said. The secretive committee is headed by the Treasury Department and includes officials from the Justice, Defense, Homeland Security and Energy departments. It reviews foreign acquisitions of U.S. assets on national security grounds.

"The Committee on Foreign Investment in the United States (CFIUS) issued an interim order to Qualcomm directing it to postpone its annual stockholders meeting and election of directors by 30 days," according to the statement. "This measure will afford CFIUS the ability to investigate fully Broadcom's proposed acquisition of Qualcomm."

Qualcomm does sensitive work for the U.S. government, people familiar with the matter have said. In addition, some U.S. officials and lawmakers are concerned Broadcom could sell parts of Qualcomm and hobble the U.S. in its race with China for developing the next generation of wireless technology, called 5G.

Qualcomm is one of America's leading developers of technology and patents for 5G, which promises the ultrafast cellular connections needed for self-driving cars, virtual reality and other innovations. But Chinese companies, especially telecommunications-equipment giant Huawei Technologies Co., have been more aggressive than U.S. ones on such research and development.

Huawei's equipment has been effectively barred from the U.S. since a 2012 congressional report said China might use Huawei's equipment to spy or disable telecom networks. Washington's broad concern is that a weakened Qualcomm could allow Huawei to further its market-leading position, leaving U.S. carriers no choice but to use its equipment. Huawei has said no government has ever asked it to spy on or sabotage another country.

A U.S. Treasury spokesman, in an emailed statement, said Monday that the CFIUS order to delay Qualcomm's annual shareholder meeting and board elections by 30 days "will afford CFIUS the ability to investigate fully Broadcom's proposed acquisition of Qualcomm."

Qualcomm representatives didn't immediately return requests for comment Monday.

Broadcom says its chief executive, Hock Tan, is American, as are most of its board and senior management team. It has said it has plans to relocate from the U.S. to Singapore.

In the statement Monday, Broadcom said it would cooperate with the CFIUS review and accused Qualcomm of disenfranchising its shareholders.

Write to Stu Woo at Stu.Woo@wsj.com


(END) Dow Jones Newswires

March 05, 2018 07:27 ET (12:27 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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