"If Broadcom completes its redomiciling in the U.S.in a way that extinguishes any non-U.S. ownership or control, then I think they can open the door to many, if not all, acquisitions. they would effectively no longer be subject to a CFIUS-initiated review or investigation", said Guillermo Christensen, a lawyer who works on CFIUS issues at Brown Rudnick in Washington.
The White House on Monday blocked a hostile takeover of U.S. chip-maker Qualcomm by its rival Broadcom, citing "credible evidence" that the deal would "impair the national security of the United States".
The order goes on to say that the entire 15-member board of directors that Broadcom had proposed for Qualcomm are now barred from standing for those positions, that all efforts by Broadcom to purchase Qualcomm are permanently barred from going into effect, and that Broadcom is to immediately terminate all of its efforts to secure ownership of Qualcomm now and forever.
While a Qualcomm deal would have made Broadcom the dominant supplier of chips used in smartphones and brought the company to the forefront of developing technology for the next generation of mobile network technology (5G), it can still make a string of smaller deals to build heft. The Committee on Foreign Investment in the United States had cited concerns about Broadcom's penchant for slashing research and development spending following acquisitions. President Trump has placed an order blocking the takeover, due to some security concerns. Earlier, the president blocked the sale of Lattice Semiconductor (NASDAQ:LSCC) to a Chinese-backed firm, as well as the sale of money transfer company Moneygram (NASDAQ:MGI) to a company affiliated with Chinese e-commerce giant Alibaba (NYSE:BABA).
Broadcom, which had pledged to move all its headquarter functions to the U.S. if it won the day, said it "strongly disagreed" with the reasoning behind the decision.
Broadcom shares were up 2 percent in trading before the bell on Tuesday.
Xilinx has a market capitalization of $20 billion and Mellanox just under $4 billion. He called the proposed merger between Qualcomm and Broadcom a direct threat to America's national security. The company raised its bid for the acquisition of rival Qualcomm to $121 billion last month after the latter rejected a $103 million offer in November 2017.
Qualcomm stock "could tread water in the $60 range" until the company can show that it is on the right track, GBH Insights analyst Daniel Ives said in a report.
Meanwhile, possible Broadcom acquisition target Xilinx was down 0.2%, near 76.90. It also doesn't tell us what Intel (NASDAQ: INTC) might do. The Journal said Intel could even make a play for Broadcom. Singapore-based Broadcom, on the other hand, disagrees with Trump's decision, saying its acquisition of Qualcomm does not pose any security risk.
Qualcomm has been attempting to block the advances of Broadcom for several weeks now and asked the CFIUS to check out the national security risks of such a merger. It sees 5G as a fresh start to make a bigger mark in the mobile world, but likely didn't want to compete against the combined might of Broadcom and Qualcomm.