President Donald J. Trump issued an Executive Order blocking Broadcom's proposed takeover of Qualcomm, or "any substantially equivalent merger, acquisition, or takeover" and directing the parties to "permanently abandon" the transaction. The Order was issued following a recommendation from the Committee on Foreign Investment in the United States ("CFIUS" or "the Committee"). The Executive Order supersedes a previous Interim Order that CFIUS issued, mandating that the parties postpone a planned investor vote for 30 days to allow the Committee time to investigate the proposed acquisition.

The Executive Order states that the President, acting under Section 721 of the Defense Production Act, found there was "credible evidence" 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." Based on this finding, the Executive Order:

  • Prohibits the proposed takeover, as well as "any substantially equivalent merger, acquisition, or takeover, whether effected directly or indirectly";
  • Requires the parties to "immediately and permanently abandon the proposed takeover";
  • Directs the parties to "certify in writing to [CFIUS] that such termination has been effected in accordance with the order and that all steps necessary to fully and permanently abandon the proposed takeover of Qualcomm have been completed";
  • Requires the parties to provide weekly certifications to CFIUS "that they are in compliance with this order and include a description of efforts to fully and permanently abandon the proposed takeover of Qualcomm and a timeline for projected completion of remaining actions";
  • Disqualifies "[a]ll 15 individuals listed as potential candidates on the Form of Blue Proxy Card filed by Broadcom and Broadcom Corporation with the Securities and Exchange Commission on February 20, 2018 (together, the Candidates) . . . from standing for election as directors of Qualcomm" and prohibits Qualcomm "from accepting the nomination of or votes for any of the Candidates"; and
  • Directs Qualcomm to hold "its annual stockholder meeting no later than 10 days following the written notice of the meeting provided to stockholders," and to provide that notice "as soon as possible."

Commentary / Keith Gerver

President Trump's Executive Order blocking Broadcom's takeover of Qualcomm caps off an unusually fast-paced CFIUS review process. Indeed, CFIUS's recommendation came approximately one week after it initiated its investigation and on the heels of Broadcom's announcement that it would accelerate its plan to re-domicile as a U.S., rather than Singaporean company. News reports that CFIUS was unhappy with Broadcom's moves to re-domicile without providing advanced notice – reportedly, in CFIUS's view, in violation of its March 4th Interim Order – likely increased the skepticism of the Committee as to the transaction. That said, it is likely that the parties could not have assuaged CFIUS's national security concerns and that any such effort would have been futile. It is unclear whether Broadcom will reattempt its takeover bid after it completes its re-domiciliation. While CFIUS arguably would no longer have jurisdiction at that point, the Committee nevertheless may attempt to insert itself into any future proposed transaction between these parties.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.