The U.S. Treasury Department has reportedly sent a letter to Broadcom LTD, highlighting concerns following an investigation into its attempted buyout of Qualcomm Inc. More specifically, the letter claims that the current results of the investigation – conducted by the Committee on Foreign Investment in the United States (CFIUS) – confirm that the buyout is a risk to national security. The concern stems from the fact that Broadcom, despite being co-headquartered in San Jose, is technically incorporated in Singapore. So any aggressive takeover of a U.S.-based business by the tech giant would effectively equate to the takeover of a U.S. business by a foreign organization. Broadcom, on the other hand, has stated that it believes itself to be in compliance with a CFIUS order from earlier this month since it has already begun its re-domiciliation process and plans to be a U.S. corporation again by April 3.
Although the results of the investigation are preliminary, it’s not unlikely that the Treasury Department or CFIUS won’t shift positions on the investigation results. The general goal behind these types of communication is to halt further talks and, in this case, to halt those talks until re-domiciliation is complete. No details were provided about what, exactly, the security concerns are in this case aside from a vague statement. Namely, the Treasury Department claims that Broadcom “took a series of actions in violation” of the previously mentioned order. However, tensions are currently very high between foreign companies and U.S. agencies, which may be exacerbating the issue. In the meantime, the U.S. Treasury Department’s next step of recourse would be to defer a decision to President Donald Trump.
Unfortunately, there’s no clear indication as to which direction the president might take on the matter since he has previously lauded Broadcom for its move to re-domiciliate as a U.S. company. He also isn’t necessarily going to listen to any advisement from CFIUS or the Treasury Department. Representatives for Qualcomm, for their part, have predominantly spoken out against the buyout. That’s both in an attempt to maintain Qualcomm’s autonomy as its own company and to save face as pressure mounts from the ever-increasing offers. The latest offer comes in at no less than $117 billion for the acquisition.