Back in 2015, chipmaker Avago Technologies acquired Broadcom for $37 billion, with the ensuing entity — Broadcom Limited — incorporated in Singapore. The company is co-headquartered in Singapore and San Diego, but the chipmaker has now announced that it will move its corporate headquarters back to the U.S. before April 3 to avoid a potential review by the Committee on Foreign Investment in the United States (CFIUS).
The CFIUS stated in a letter last week that it would review Broadcom's $117 billion Qualcomm takeover bid for national security risks, and by redomiciling to the U.S., Broadcom is looking to avoid that.
The move comes as U.S. lawmakers are wary of an Asian company taking over Qualcomm's and its vast trove of patents. For its part, Broadcom's plans to move its headquarters back to the U.S. aren't new — it announced last November that it would do so following its acquisition of Brocade Networks, which was cleared by the CFIUS.
By moving back to the U.S., Broadcom is looking to allay fears of a foreign entity seizing control of Qualcomm. Even if the deal with Qualcomm were to fall through, Broadcom has to redomicile to the U.S. as part of its Brocade acquisition.
The company has mentioned that it will complete redomiciliation by April 3. That date is interesting as it falls two days before Qualcomm's annual shareholder meeting, which could see six Broadcom-nominated directors added to Qualcomm's 11-member board. For now, it remains to be seen if Broadcom can avoid the CFIUS review by moving back to the U.S.
Broadcom Redomiciliation Now Expected to be Completed by April 3, 2018
Broadcom is in the final stages of redomiciling to the U.S. and now expects to complete redomiciliation by April 3, 2018. Broadcom's proposal to acquire Qualcomm has always been premised on the completion of Broadcom's previously announced plan to redomicile. In both the definitive merger agreement that Broadcom provided to Qualcomm and in the revised version that Qualcomm sent back to Broadcom on February 26, 2018, one of the closing conditions was that Broadcom redomicile to the U.S., and notably, in neither party's draft was the closing of the proposed acquisition conditioned on CFIUS clearance. In short, U.S. national security concerns are not a risk to closing, as Broadcom never plans to acquire Qualcomm before it completes redomiciliation.
Broadcom recognizes the essential role the member agencies of CFIUS play in ensuring U.S. national security. Broadcom, which is in all important respects a U.S. company, has been repeatedly approved by CFIUS in its previous acquisitions of U.S. companies and has always engaged productively with CFIUS to ensure U.S. national security is protected. Broadcom believes the CFIUS process is an essential aspect of protecting U.S. national security and it is supportive of current efforts, including those of Senator Cornyn, Representative Pittenger, and many of their colleagues, to enhance the CFIUS process. In addition, as a company incorporated in the U.S., Broadcom looks forward to working directly with the U.S. government as a trusted supplier, and continuing Qualcomm's existing engagements.
Broadcom's plan to redomicile is and has been a matter of public record since last November and has been addressed multiple times in recent months. This plan was first announced in the White House when Hock Tan, Broadcom's President and Chief Executive Officer, had the honor to announce the plan alongside President Trump in the Oval Office on November 2, 2017. Furthermore, CFIUS reviewed and cleared Broadcom's acquisition of Brocade, which closed on November 17, 2017. As part of the clearance agreement, Broadcom agreed with CFIUS to redomicile to the U.S. The details are included as part of Broadcom's 10-K "Risk Factors" and are also outlined in the Proxy Statement for Broadcom's Special Stockholder Meeting. Given Broadcom's public disclosures about the redomiciliation process since last November, as well as its direct communications to CFIUS, Broadcom has been fully transparent with CFIUS about the redomiciliation process, and believes it is in full compliance with the March 4 Interim Order.