Broadcom Ltd. is on course to win all six of the seats it’s seeking on Qualcomm Inc.’s board, giving it a majority to push forward with its hostile takeover even as a U.S. government panel forced a delay of the final tally amid concerns about the deal’s threats to national security.
Based on a count of more than half of the votes already cast, Broadcom would win a majority of Qualcomm’s board seats, according to information obtained by Bloomberg. If that result holds up when the final vote takes place, Broadcom would have a mandate to overturn Qualcomm management’s opposition to the $117 billion deal. Representatives for Broadcom and Qualcomm declined to comment.
The two companies are locked in a battle over the future of Qualcomm, whose board and management say Broadcom’s offer is a gambit to steal the company on the cheap. Investors were scheduled to vote on Broadcom’s attempt to take control of the board at a meeting Tuesday, an event that was postponed on order of the Committee on Foreign Investment in the U.S. Both companies pointed fingers at each other over the root of the CFIUS investigation.
The endorsement of Broadcom’s nominees would represent a rejection of Qualcomm’s assertion that the company would be stronger if run as a stand-alone business. Any Broadcom candidates elected would be required to act in the best interest of Qualcomm and its shareholders. For now, investors appear to be endorsing Broadcom Chief Executive Officer Hock Tan’s vision for the company, though he’s not seeking a board seat for himself. Tan built Broadcom, one of the biggest companies in the $400 billion chip industry, via a string of acquisitions.
Qualcomm Chief Executive Officer Steve Mollenkopf has so far received the second-lowest number of votes among the combined 17 nominees from both sides, according to the data seen by Bloomberg. That indicates that he would lose his seat. Chairman Paul Jacobs, son of the company’s founder, is also at risk of being replaced, depriving Qualcomm’s management of any representation on the board. The meeting will now be held April 5, Qualcomm said late Monday.
Four of the Broadcom nominees already have more than 500 million votes, with the other two each almost 150 million ahead of the nearest Qualcomm candidates, according to the data. Qualcomm has about 1.4 billion shares outstanding.
Many of the largest blocks of shares, which are in the hands of institutional holders, have yet to vote, according to a person familiar with the process, who asked not to be identified because the details aren’t public. Stockholders can also change their votes up until and including in the meeting, which has yet to be rescheduled. T. Rowe Price Group Inc. submitted an early vote in favor of Broadcom’s board nominees, according to a person familiar with the investor’s action.
The postponement of the vote, ordered by CFIUS, set off an another angry exchange between the two companies, which have held just two meetings in over four months and have made no progress in negotiations toward a deal. Broadcom slammed Qualcomm’s decision to “secretly” file a voluntary request with CFIUS to start an investigation, labeling it a “blatant, desperate act” to entrench its incumbent board of directors. Qualcomm shot back that Broadcom’s claims that the CFIUS inquiry was a surprise to them has “no basis in fact.” Broadcom has been interacting with CFIUS for weeks and made two written submissions, Qualcomm said.
The merger of the two chipmakers would be the biggest technology deal in history. The order for a delay by the government panel is unusual, since CFIUS doesn’t usually investigate before a merger is agreed upon. But deals involving foreign companies, especially those of sensitive U.S. technology like semiconductors, have increasingly been in the spotlight.
Broadcom’s ties to China’s largest telecom equipment maker, Huawei Technologies Co., has already raised concerns, although Qualcomm also works with Huawei. U.S. President Donald Trump last year blocked a Chinese-backed takeover of Lattice Semiconductor Corp. because of the importance of semiconductors to the U.S. government and China’s role in the proposed acquisition. Earlier this year Ant Financial, a Chinese payments company controlled by Alibaba Group Holding Ltd. co-founder Jack Ma, canceled its proposed $1.2 billion offer to buy MoneyGram International Inc. after failing to win clearance from CFIUS.
Tan has tried to ease the path to regulatory clearance and facilitate future acquisitions, meeting with Trump in the White House last year to announce he was moving Broadcom’s headquarters to the U.S. from Singapore. Once Broadcom re-domiciles — currently planned for no later than May 6 — the takeover wouldn’t be a CFIUS covered transaction, Broadcom said in a statement Tuesday.