Regarding the Proposed Takeover of Qualcomm Incorporated by Broadcom Limited

President Trump issued an order under the Defense Production Act blocking Singapore-based Broadcom's proposed takeover of U.S. semiconductor company Qualcomm, citing credible evidence that the deal threatened national security. The order prohibits the merger, disqualifies Broadcom's 15 proposed director candidates, requires immediate and permanent abandonment of the takeover with weekly compliance certifications to CFIUS, and authorizes the Attorney General to enforce these measures.

Federal Register Open PDF 83 FR 11631

Impact dates

Mar 19, 2018
Weekly compliance certifications to CFIUS until termination certification provided
Mar 12, 2018
Qualcomm annual stockholder meeting to be held no later than 10 days following written notice under Delaware DGCL § 222(b)
Mar 12, 2018
Written certification of termination to CFIUS upon completion of all steps to abandon takeover

Key directives

Prohibit proposed takeover of Qualcomm by Broadcom and any substantially equivalent transaction
Disqualify 15 Broadcom proxy candidates from Qualcomm board election
Require Qualcomm to hold annual stockholder meeting no later than 10 days after notice under Delaware DGCL § 222(b)
Require immediate and permanent abandonment of proposed takeover
Require written certification of termination to CFIUS upon completion
Require weekly compliance certifications to CFIUS until termination certified
Prohibit transactions or devices designed to circumvent this order
Authorize Attorney General to enforce order
Direct Secretary of Treasury to transmit order to Qualcomm and Broadcom

Who is ordered

Timeline

Immediate

Proposed takeover prohibited
15 Broadcom director candidates disqualified
Purchaser and Qualcomm must immediately and permanently abandon takeover
Weekly compliance certifications to CFIUS begin

Near term (90d)

Qualcomm must hold annual stockholder meeting within 10 days of notice under Delaware law
Written certification of termination to CFIUS due upon completion of abandonment steps

Long term

Precedent for CFIUS-related presidential blocking of technology sector acquisitions
Potential further orders reserved to protect national security

Risks & tensions

Unusual direct presidential intervention in pending corporate transaction via CFIUS/section 721 rather than standard regulatory process
Potential chilling effect on foreign investment in U.S. technology sector, particularly from Asian entities
Timing pressure on Qualcomm stockholder meeting may disadvantage certain governance processes
Broad 'substantially equivalent' prohibition and anti-circumvention provision create compliance uncertainty for related transactions