Trump halts Broadcom takeover of Qualcomm

US president rejects proposed $117 billion deal on grounds of national security

Shares of Broadcom, which is effectively barred from continuing its hostile pursuit of Qualcomm, rose nearly 3 per cent in morning trading. Qualcomm shares fell 3.5 per cent. Photograph: Reuters

Shares of Broadcom, which is effectively barred from continuing its hostile pursuit of Qualcomm, rose nearly 3 per cent in morning trading. Qualcomm shares fell 3.5 per cent. Photograph: Reuters

 

Broadcom chief executive Hock Tan is unlikely to put the brakes on his acquisition spree after the microchip maker’s $117 billion bid for rival Qualcomm was blocked by US president Donald Trump on national security grounds, analysts said on Tuesday.

Mr Trump signed an order late on Monday to halt what would have been the biggest-ever technology deal due to concerns that a merger would give China the upper hand in mobile communications.

Shares of Broadcom, which is effectively barred from continuing its hostile pursuit of Qualcomm, rose nearly 3 per cent in morning trading. Qualcomm shares fell 3.5 per cent.

The top Democrat in the US senate, Chuck Schumer, praised President Trump’s decision. “We all know that China has been rapacious about trade and very smart,” Mr Schumer said in a speech in the senate. “They look for places where they can steal our best technology.”

Serial acquirer

Mr Tan is a serial acquirer who has turned Avago, the small chipmaker he was running with a market value of just $3.5 billion in 2009, into a giant worth more than $100 billion.

He bought Broadcom for $37 billion in a leveraged deal in 2015 and followed it up with a $5.5 billion deal to acquire Brocade Communications two years later.

Most analysts assume Broadcom will walk away from the Qualcomm deal and some identified Xilinx and Israel’s Mellanox Technologies as its likely next targets.

Xilinx makes chips used for wireless communication and Mellanox’s products connect servers and storage systems, complementing Broadcom’s broad portfolio.

Broadcom could not be immediately reached for comment.

“We believe Broadcom’s options start with a continuation of broadly scoped communications-focused M&A,” B. Riley analyst Craig Ellis said. “Broadcom covets high-margin, technology-rich moderate-growth businesses with complementary end market and customer exposure.”

The Committee on Foreign Investment in the United States, which raised concerns about the Qualcomm deal, listed the highly leveraged nature of Broadcom’s bid for its larger rival as a major concern and a risk to Qualcomm’s leadership on mobile technology. – Reuters