Qualcomm meeting on hold, but Broadcom drama still heats up
Qualcomm Inc.âs annual shareholder meeting has been put on hold while the U.S. probes whether the hostile buyout attempt by Broadcom Ltd. presents a national security risk, and both companies squabbled in their respective statements.
Qualcommâs annual shareholder meeting was scheduled for Tuesday, after Broadcom lowered its offer to Qualcomm to $79 a share from $82 a share after Qualcomm raised its own bid to acquire NXP Semiconductors NV NXPI, +0.56% which followed months of jockeying between the c ompanies in a proxy battle about their respective slate of directors. But late Sunday, the Committee on Foreign Investment in the U.S. announced that meeting would be delayed by at least 30 days while it investigated the deal.
Qualcomm QCOM, -1.13% shares fell 0.9% to $64.15 in recent trade, while Broadcom AVGO, -1.55% shares declined 0.1% to $250.53. For the year, Broadcom shares are down 2.5%, while Qualcomm shares are up 0.2%. In comparison, the S&P 500 index is up 1.8% for the year.
Broadcom blasted the move, saying that Qualcomm had âsecretly filed a voluntary request with CFIUS to initiate an investigationâ in late January to delay the meeting, calling it âa blatant, desperate act by Qualcomm to entrench its incumbent board of directors and prevent its own stockholders from voting for Broadcomâs independent director nominees.â
Qualcomm responded that Broadcomâs statement âis 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.â
Qualcomm continued: âBroadcomâs 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.â
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Republican Senator Tom Cotton from Arkansas issued a statement in support of the probe.
âQualcommâs work is too important to our national security to let it fall into the hands of a foreign companyâ"and in a hostile takeover no less,â he said.
Cotton said itâs âhard to see a good rea son why we should hand over one of our leading computer-chip makers, and thereby give Chinese companies a leg-up in the race to develop 5G and the next generation of technology.â
Chinese tech companies have also worried about the tie-up on concerns it could squeeze margins for mobile phone makers.
Broadcom is based in Singapore but the company said back in November 2017 that it would move its headquarters to the U.S. In a statement, Broadcom also underscored its board of dire ctors and senior management are âalmost entirely Americans.â
The CFIUS has been active in stepping between foreign companies who are seeking to buy U.S. chip makers in the past couple of years. For example, CFIUS has helped to scuttle deals from Chinese firms to acquire Xcerra Corp. XCRA, +0.10% and Lattice Semiconductor Corp. LSCC, +0.83%
Cowen analyst Karl Ackerman, who has an outperform rating on Broadcom and a $315 price target, said he highly doubts Broadcom will pull its $79 a share bid for Qualcomm, even though the request for a CFIUS probe that delayed the shareholder meeting violated terms of the offer. Ackerman, who does not cover Qualcomm, sided with Broadcom and the company is expected to relocate back to the U.S. by May 6, which âshould eliminate the need for CFIUS approval.â
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âWe continue to see the final outcome of the AVGO/QCOM transaction entirely dependent on QCOMâs shareholder vote, not its [Board of Directors],â Ackerman said. âAVGOâs opportunity in wired and inexpensive valuation provide a backstop against near-ter m deal concerns.â
RBC Capital Markets analyst Amit Daryanani, who considers Broadcom a âtop pickâ and has a $325 price target on the stock, said he is less certain that the deal goes through.
âGiven QCOMâs recent revised bid and the delay of the annual shareholder meeting, we see increased probability that QCOM will remain as an independent company,â Daryanani said.
Daryanani said that Broadcom can sustain double-digit growth with or without Qualcomm and noted that other possible takeover candidates for Broadcom could be Xilinx Inc. XLNX, +0.79% Analog Devices Inc . ADI, +1.80% Maxim Integrated Products Inc. MXIM, +0.82% or Marvell Technology Group Inc. MRVL, +0.30%Source: Google News US Business | Netizen 24 United States