Wall Street Stands To Lose Billions As Trump Hangs A "Not-For-Sale Sign" On US Tech

Broadcom executives should've seen this coming.

For months now, Singapore-based Broadcom has pursued a merger with US-based Qualcomm, raising its bid for the largest US-based technology firm to $117 billion, which is developing chips that are expected to be integral to 5G network technology in the US. Then, national security issues reared their head.

Earlier this month, the Committee on Foreign Investment in the US inserted itself into the negotiations (following a request from lawmakers) by ordering Qualcomm to delay its March 6 shareholder meeting to give CFIUS more time to investigate the takeover bid.


CFIUS's involvement presented yet another obstacle to the deal. Qualcomm had actively resisted the Broadcom's overtures, but the Singapore-based firm's willingness to repeatedly raise its bid, along with its plans to redomicile in the US, impressed upon investors that the company was committed to closing the merger.

Then last night, President Trump definitively quashed the deal by issuing an executive order blocking the deal on national security grounds.

"There is credible evidence that leads me to believe that Broadcom Limited, a limited company organized under the laws of Singapore (Broadcom) ... through exercising control of Qualcomm Incorporated (Qualcomm), a Delaware corporation, might take action that threatens to impair the national security of the United States..."

The move, as many analysts noted, was unusual. But Kyle Bass of Hyman Capital anticipated the intervention, telling CNBC last week that QCOM's importance to 5G tech meant that "we can't possible let the Broadcom Qualcom merger to go through.

And on Monday, the Treasury Department sent a letter to lawyers involved in the deal expressing concerns about Chinese competitors in 5G network development, which raises national security concerns over the Broadcom-Qualcomm merger.

Broadcom said in a letter to Congress regarding its offer to acquire Qualcomm that the company would not sell any "critical national security assets" to any foreign companies.

But clearly those assurances weren't enough. And today, as Bloomberg explains, Trump's swift rejection of the hostile takeover sent a clear message to overseas investors and companies: Any deal that could give China an edge in critical technology will be blocked on national security grounds.

And right now, Qualcomm is locked in a race with China’s Huawei Technologies Co. over which company will dominate the development of next-generation wireless technology. By blocking the deal, Trump is sending a strong message to foreign firms: Vital American technology is not for sale.

"This decision hangs a huge ‘not-for-sale’ sign on just about every American semiconductor firm," said Scott Kennedy, who studies China’s economic policy at the Center for Strategic & International Studies in Washington. "A Chinese entity doesn’t need to be anywhere near a transaction now in semiconductors for the deal to be nixed."

The White House is mulling a broad range of imports to punish Beijing for its alleged theft of intellectual property - measures that could include imposing tariffs on an even broader range of imports, and blocking Chinese investments in the US.

And while Broadcom is a Singapore-based company (and is in the process of redomiciling in the US) it's believed that China would've exerted undue influence over the combined firm.

As Bloomberg points out, only five takeovers of American firms have been blocked by US presidents on national security grounds since 1990. Barack Obama blocked two deals during his eight years in office. Trump has blocked two deals in six months. And already, CFIUS has played a role in opposing at least nine takeover bids. Most of these involved Chinese companies.


Lawmakers have internalized Trump's national security rhetoric by considering legislation that would expand the universe of overseas investments that require national security approval from CFIUS. Trump has endorsed the bill, which was proposed by Sen. John Cornyn with China in mind.

The reasoning for blocking the deal is relatively straightforward: Any disruption in Qualcomm's dominant position in the semiconductor market would cede an edge in the global tech arms race to China's Huawei. This represents a shift away from blocking deals for fear that China could steal their technology, to blocking deals because they might impact the competitiveness of American companies...

"China would likely compete robustly to fill any void left by Qualcomm as a result of this hostile takeover," CFIUS said in the letter. "Given well-known U.S. national security concerns about Huawei and other Chinese telecommunications companies, a shift to Chinese dominance in 5G would have substantial negative national security consequences for the United States."

"Concern has expanded from existing technologies with national security implications potentially falling into rivals’ hands to ensuring American companies continue to invest in R&D to maintain their technological edge," he said.

While blocking the deal will no doubt play well with Trump's base, it will elicit howls of disapproval from Wall Street, which stands to lose hundreds of millions - if not billions - in revenue from all of these blocked mergers. In fact, as a result of just this one busted deal it may be time to revise Q1 financial EPS lower: according to preliminary estimates, Qualcomm-Broadcom was expected to earn banks $280 million in advisory fees.

Bankers are probably already reminiscing about the days of the now long gone "China M&A premium..."


Xena fobe VAL THOR Tue, 03/13/2018 - 08:52 Permalink

And seize the properties already owned.  The problem is these foreign owners have the rights of citizens but are loyal to foreign governments.  They advocate for anything destructive to US sovereignty and society.  Don't like illegals? Too bad, foreign business owners want you to provide welfare so they can get cheap labor.  Like the wildllife in the hills near your home?  Too bad, foreigners hate all living things.  The list is endless.  

In reply to by VAL THOR

LawOfBass ebworthen Tue, 03/13/2018 - 09:58 Permalink

BUILD a wall.  

UPVOTE.  I am not an uber-nationalist but unless we bring back production and reliance on our own energy this country is screwed.  I believe that the only thing that can bring this country back is a MASSIVE event that forces us to rely on ourselves.  Cut our own wood, build our own houses, no amazon, no internet news...a walking dead type scenario.  It's all just too easy to sit around and do nothing. I am guilty of this...

In reply to by ebworthen

wmbz Tue, 03/13/2018 - 08:07 Permalink

"While blocking the deal will no doubt play well with Trump's base, it will elicit howls of disapproval from Wall Street, which stands to lose hundreds of millions - if not billions - in revenue from all of these blocked mergers"

"howls of disapproval from Wall Street"

~ Sounds just fine to me.

LawsofPhysics Tue, 03/13/2018 - 08:08 Permalink

Good, fuck all the wall street criminals that have been stealing real wealth for years with their paper/digital money created out of thin fucking air with no real work, no risk risk, and no real collateral requirements!

Still, this sounds a bit too good to be true...

"Full Faith and Credit"

same as it ever was!

HopefulCynical Doppelganger71 Tue, 03/13/2018 - 10:21 Permalink

Look for a large (intentional) drop in the Dow or NASDAQ (or both) in the next few days...

They pulled that shit last month, remember? Right as the full scope of HillBama & The Alphabets' treason was being brought to light. Trump just shrugged it off with a "Shit happens sometimes; MAGA, bitchez." So (((they))) can try it again, but since they can't actually back up their bluff (they were counting on a $hitlery presidency to give them time to get the rest of their ducks in a row), it's sort of pointless. Trump's not going to blink.

The game is afoot, folks. To what end I can't say with full confidence, although I'm leaning toward Trump pulling a massive headfake and actually draining the swamp as much as possible. I think he appoints people who agree with a few of his objectives, accomplishes those, and then when he gets pushback on the next set, he replaces them with people who agree on those. Rinse, repeat. I also think the Swamp rats are under the impression that they're going to "tame" him - and Trump is letting them think that, for now.

In reply to by Doppelganger71

Scrot Tue, 03/13/2018 - 08:10 Permalink

In Georgia, where I am from, millions of acres of farm land are being purchased by Chinese companies. They are now the largest land owners in America. They are also buying all kinds of food production companies. Those Smithfield hams at Wal Mart... bought by the Chinese in 2013. One example of thousands...

brushhog Scrot Tue, 03/13/2018 - 08:16 Permalink

As a foreigner you can never buy farm land in China or in many countries. Even in many European countries you can buy a house, but foreigners [even naturalized citizens who emigrated ] are prevented from owning farm land. Why? Because its too vital, too valuable a resource to lose control of to foreign interests.

In reply to by Scrot

Last of the Mi… Tue, 03/13/2018 - 08:10 Permalink

It's about time not that I'm that impressed with cell phone coverage. Around here there's about a 50/50 chance you'll get a dropped call if you're driving around. I think the reliability was much better a few years ago with "can you hear me now" running around. Also, way past time to move towards the break up of social networks which are nothing more than fake news outlets censoring what they don't like. If it's a social network there should be a clear line of demarcation of what is and isn't allowed instead of this SJW crap designed to thwart anything constitutional.

Iconoclast421 Tue, 03/13/2018 - 08:15 Permalink

Trump saved BRCM a large amount of money. Yuuuuge amount of money. Qualcomm isnt worth $120 billion.... that is just bubble money bubbling and frothing around. Give it a few years and they will be down to a more reasonable $50 billion.

overmedicatedu… Tue, 03/13/2018 - 08:22 Permalink

watched fox biz on this ..disgusted all NWO FREEEE TRADE outrage..how dare he(Trump) says congressman R on set..he said "congress will investigate this to make sure there were security issues with the block" along with blocking his tariffs..cue up the dagan hag to cry freeee the trade. fuk em..

give us american jobs with american co's and cut the drain of wealth with trade deficits like we have had for 30 yrs

Blankfuck Tue, 03/13/2018 - 08:30 Permalink

Too late, Amerika sold out to the self centered american traitors long ago.While they drink their champagne millions of others will suffer under foreign rulers

shimmy Tue, 03/13/2018 - 08:34 Permalink

I like pumpkin constantly saying everything is a national security issue. he's worse than dubbya with this shit. 

Why are the trumpard idiots here acting like this is an Asian company when it is an American one?