President Trump issued an executive order late today (March 12) blocking the attempt by Broadcom Ltd. to take over San Diego’s Qualcomm in a proposed $117 billion hostile deal. Acting on a recommendation by the Committee on Foreign Investment in the United States, Trump said that Broadcom, by acquiring the local company “might take action that threatens to impair the national security of the United States.”
Broadcom has headquarters in Singapore and in Silicon Valley. According to Bloomberg, Trump’s decision was made just hours after Hock Tan, the chief executive of Broadcom, met with Pentagon officials to save the plannned acquisition.
The attempted takeover threatened Qualcomm leadership in developing the next generation of wireless technology. The United States government feared that Broadcom would slice research and development spending to increase short-term earnings — a step that rapid acquirers such as Broadcom often take. Such a business strategy could help China become the dominant supplier, accodrding to Bloomberg.
Earlier, it appeared that Broadcom could garner six seats on the Qualcomm board if a vote had taken place. However, the meeting was delayed for 30 days, and the U.S. government stepped in. The San Diego economy stood to lose many jobs after a takeover.