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Trump Blocks Broadcom Takeover of Qualcomm on Security Risks

David McLaughlin
Signage is displayed outside of Broadcom Ltd. headquarters in Irvine, California, U.S., on Monday, Nov. 6, 2017. Broadcom Ltd. and its advisers are gearing up for a proxy battle, making an appeal directly to shareholders, should Qualcomm Inc. reject its $105 billion takeover offer, according to a person with knowledge of the matter. Photographer: Patrick T. Fallon/Bloomberg

President Donald Trump issued an executive order Monday blocking Broadcom Ltd. from acquiring Qualcomm Inc., scuttling a $117 billion hostile takeover that had been subject of scrutiny over the deal’s threat to U.S. national security.

Trump acted on a recommendation by the Committee on Foreign Investment in the U.S., which reviews acquisitions of American firms by foreign investors. The decision to block the deal was unveiled just hours after Hock Tan, the chief executive officer of Singapore-based Broadcom, met with officials at the Pentagon in a last-ditch effort to salvage the transaction.

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"There is credible evidence that leads me to believe that Broadcom Ltd." by acquiring Qualcomm "might take action that threatens to impair the national security of the United States," Trump said in the order released Monday evening in Washington.

The order underscores the tough stance the Trump administration is taking on foreign takeovers of U.S. technology firms. In September, he blocked the sale of Lattice Semiconductor Corp. to a Chinese-backed investor. That was just the fourth time in a quarter century that a U.S. president stopped a foreign takeover of an American firm on national security grounds. At least a half-dozen technology deals have collapsed during the Trump administration in the face of concerns raised by CFIUS.

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The Treasury Department, which leads CFIUS, had said the Qualcomm deal raised red flags because it threatened Qualcomm’s leadership in developing the next generation of wireless technology. The government said it feared Broadcom would cut investment in research and development in order to increase short-term profits. That could allow Chinese companies to become the dominant supplier, the U.S. said.

Trump’s order came as Broadcom was in the midst of moving its headquarters from Singapore to the U.S. It was seeking to gain majority control of San Diego-based Qualcomm’s board to advance its hostile takeover. CFIUS ordered the shareholder vote be postponed to investigate the transaction.

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Updates with previous failed deals starting in fourth paragraph.

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