BROADCOM-QUALCOMM MERGER BID FACES STIFF SCRUTINY
Broadcom’s bid for Qualcomm set for lengthy review due to strategic concerns, huge size of deal
APOTENTIAL megamerger between chipmaker Broadcom Ltd and United States rival Qualcomm Inc is likely to face stern scrutiny in China, say antitrust lawyers, amid a strategic push by Beijing into semiconductors.
Broadcom made an unsolicited US$103 billion (RM435.69 billion) bid for Qualcomm on Monday, aimed at creating a US$200-billion-plus behemoth that could reshape the industry at the heart of mobile phone hardware.
But Chinese regulatory approval could be a hold-up. Beijing and Washington have sparred over technology deals, including in chips, with the Committee on Foreign Investment in the United States knocking back a number of takeovers involving Chinese firms this year.
The thorny topic is likely to come up when US President Donald Trump visits China this week with Qualcomm executives in tow.
The merger would face a lengthy review from the antimonopoly unit of China’s commerce ministry, due to strategic concerns, the huge size of the deal and because Qualcomm has come under fire before in the country over competition concerns.
“This is a critical industry for China and Qualcomm has been fined by the Ministry of Commerce before so it’s on its radar,” said Wendy Yan, Shanghai-based partner at law firm Faegre Baker Daniels.
Qualcomm agreed to pay a record fine of US$975 million in China in 2015 to end a probe into anti-competitive practices.
China is making a major push to develop its own semiconductor industry under local champions, such as Tsinghua Unigroup and Fujian Grand Chip Investment, to help cut reliance on global operators, including Qualcomm, Samsung Electronics Co Ltd and Intel Corp.
“The ministry will consider industry security for the whole country, as the semi-conductor industry has strategic importance to China,” said a second Shanghai-based antitrust lawyer.
Meanwhile, Silver Lake is set to plow as much as US$2.5 billion, its biggest equity cheque yet, to back Broadcom’s plan, according to sources.
The cheque would be part of US$5 billion in convertible debt financing that the private equity firm has pledged to arrange for the giant chipmaker deal, which is valued at US$130 billion, including net debt.
The US$5 billion package would be Silver Lake’s largestever commitment to a transaction, said the source.