Broadcom is now a US company, having fully redomiciled its business as of Wednesday, April 4, according to the company. Shareholders of Broadcom Ltd. stock received shares in the newly issued stock of Broadcom Inc. on a one-for-one basis.
Although Broadcom’s plan to redomicile was announced in November in the White House alongside US President Donald Trump, it was not enough to assuage US concerns about losing the 5G technology race to China.
Now, the former target company, Qualcomm, itself risks becoming a larger casualty of the widening trade war between the US and China.
The stop imposed by President Trump to Singapore-based Broadcom’s $117 billion dollar hostile takeover bid for US chip maker Qualcomm may not stop cross-border acquisitions but sets a precedent for foreign deals.
“I do expect Trump’s stance to limit some cross-border M&A but not completely eliminate it,” Angelo Zino, senior equity analyst at CFRA Research, tells Global Finance. “It will depend on the technology being acquired and size of the deal.” California-based chip-equipment maker KLA-Tencor recently announced plans to buy Israeli firm Orbotech.
Chinese antitrust authorities still need to clear Qualcomm’s proposed takeover of Dutch chipmaker NXP Semiconductors. Many Chinese companies have expressed concern about the deal, and China, the world’s largest semiconductor importer, is seeking to build its own capacity. As of Monday, April 2, approximately 15% of NXP common shares had been validly tendered, and Qualcomm extended its offer until Friday, April 6.
“The pending QUALCOMM-NXP Semiconductor deal is being closely watched and will have negative implications should the deal get rejected,” says Zino, who covers semiconductors and wireless companies.
Foreign acquisitions of large US entities are likely to be under more scrutiny than domestic companies looking abroad as the Trump administration continues to implement its “America first” agenda.
“I would agree that we are unlikely to see a foreign based company be able to acquire a US based semiconductor company as the US will want to protect the valuable IP property that these chipmakers possess,” Zino says.
Domestic deals are on a smoother path to success. “As far as overall M&A in the chip space, we continue to think consolidation makes a lot of sense and expect further deals to be announced in 2018,” CFRA’s analyst says.