Broadcom Says Will 'Cooperate with CFIUS,' Slams Qualcomm 'Secret' Request

Broadcom (AVGO), which is pursuing a hostile bid to take over Qualcomm (QCOM), this morning issued a statement accusing Qualcomm of "desperation" in obtaining a delay in its shareholder vote, which had been scheduled for Tuesday.

Qualcomm stock is down $1.48, or 2.3%, at $63.26, in early trading. Broadcom stock is unchanged at $250.87. NXP Semiconductors (NXPI), which is caught between the two, is also unchanged, at $124.09.

But it also gave the impression it is not walking away from its bid.

There is no word yet from Qualcomm; I've reached out to the company for comment.

Reuters reported late Sunday that the U.S. Treasury Department's CFIUS, the body charged with examining foreign investment, "issued interim order to Qualcomm to postpone annual stockholder meeting."

The Financial Times's Arash Massoudi and Rochelle Toplenskywrite this morning that there was a statement from the Treasury department that the vote will be delayed 30 days, in order to "afford Cfius the ability to investigate fully Broadcom's proposed acquisition of Qualcomm."

Broadcom's statement this morning implies Qualcomm engineered the delay.

"Broadcom was informed on Sunday night that on January 29, 2018, Qualcomm secretly filed a voluntary request with CFIUS to initiate an investigation, resulting in a delay of Qualcomm's Annual Meeting 48 hours before it was to take place," said Qualcomm.

"This was 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."

Broadcom said Qualcomm never mentioned having submitted the request, during multiple meetings the companies have had. The omission was "an intentional lack of disclosure," says Broadcom.

Broadcom also notes it "recognizes the important role CFIUS plays in protecting national security," and says it is " fully committed to cooperating with CFIUS."

That's significant, given some may have been wondering if this latest move would prompted Broadcom to walk away.

For example, Srini Pajjuri with Macquarie, who on Friday wrote that all scenarios for Broadcom looked positive, this morning writes that the delay, if true, " "is not a scenario we envisioned."

Pajjuri, who has an Outperform rating on Broadcom shares, wondered aloud in a note to clients whether

AVGO previously indicated that its offer was premised on QCOM not delaying or adjourning its annual meeting. Given the unusual circumstances, we are unsure whether the company will wait for the investigation to conclude or simply walk. It's also unclear to us if the investigation will actually conclude in 30 days (CFIUS can extend by additional 45 days in some cases and may even refer to the President). While the investigation could complicate things for AVGO, we see limited downside to the stock in the short term given the depressed valuation, and believe that the stock will rally if AVGO decides to walk.

You'll recall a CFIUS review was in the news last week, as two Republicans, Duncan Hunter and John Cornyn urged a review.

Sunday, The Wall Street Journal's editorial board called for a CFIUS review, raising the strategic importance of 5G wireless technology. The Journal's editors imply that Treasury has declined to review the matter, citing unnamed sources. This morning's reports would appear to contradict that.

The editors write that Broadcom probably wouldn't "destroy" Qualcomm, but they are concerned that "Broadcom's history and intentions deserve scrutiny."

"Qualcomm is important enough to U.S. national security that Broadcom's takeover warrants a careful Cfius review no matter what its CEO promised Donald Trump."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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