The Committee on Foreign Investment in the United States (CFIUS) ordered Qualcomm to postpone the scheduled for March 6 shareholder meeting in order to inverstigate Broadcom's takeove proposal.
CFIUS is an inter-agency committee of the United States Government that reviews the national security implications of foreign investments in U.S. companies or operations. All companies proposing to be involved in an acquisition by a foreign firm are supposed to voluntarily notify CFIUS, but CFIUS can review transactions that are not voluntarily submitted.
According to Broadcom, it was Qualcomm that "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. In that meeting , Qualcomm's shareholders were supposed to choose whether they would accept Broadcom's $117 billion takeover offer for 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 responded promplty: "Broadcom Limited's response to the order from the Committee on Foreign Investment in the U.S. (CFIUS) is a continuation of its now familiar pattern of deliberately seeking to mislead shareholders and the general public by using rhetoric rather than substance to trivialize and ignore serious regulatory and national security issues. CFIUS is an independent, multi-agency U.S. governmental body charged with protecting U.S. national security. CFIUS has determined that there are national security risks to the United States as a result of and in connection with the transaction proposed by Broadcom," said Qualcomm.
"Broadcom's dismissive rhetoric notwithstanding, this is a very serious matter for both Qualcomm and Broadcom. Broadcom's claims that the CFIUS inquiry was a surprise to them has no basis in fact. Broadcom has been interacting with CFIUS for weeks and made two written submissions to CFIUS.
In compliance with the CFIUS order, Qualcomm will delay its Annual Meeting of Stockholders and election of directors for at least 30 days so that CFIUS can fully investigate Broadcom Limited's proposal to acquire Qualcomm," Qualcomm added.
Broadcom, which is largely owned by the same United States institutional investors that own Qualcomm, said it would cooperate with CFIUS in any review.
In the meantime, Qualcomm shareholder T. Rowe Price Group Inc. reportedly voted in favor of Broadcom Ltd.'s board nominees, supporting an attempt to overturn Qualcomm's opposition to the $117-billion hostile takeover bid, according to Bloomberg.
Broadcom has proposed 6 new members for Qualcomm's board - enough to give the bidder control of the 11-person Qualcomm board that has so-far shunned the approach.