The US government has put the dampers on a heated battle for digital chipmaker Qualcomm, citing national security concerns.
Qualcomm, which has made chips for products such as Apple iPhones, will now have to delay a meeting in which shareholders were due to vote on whether to replace six of its directors with new individuals put forward by Broadcom, the chip competitor which is pursuing a $117bn takeover.
The Committee on Foreign Investment in the United States (Cfius), a branch of the US Treasury which can intervene on national security grounds, ordered the 30-day delay to "afford Cfius the ability to investigate fully Broadcom’s proposed acquisition of Qualcomm".
Broadcom, which has prompted the concerns due to the fact that it is based in Singapore, slammed Qualcomm for involving Cfius.
"Qualcomm secretly filed a voluntary request with Cfius to initiate an investigation, resulting in a delay of Qualcomm's annual meeting 48 hours before it was to take place," the company said in a statement.
This was a blatant, desperate act by Qualcomm to entrench its incumbent board of directors and prevent its own stockholders from voting for Broadcom's independent director nominees.
Broadcom, which was formerly a US-headquartered company before it rebased to Singapore for tax reasons, had announced plans to redomicile to the US. It said today that process was "well underway", and when the process completes it would not be subject to Cfius scrutiny.
But politicians have been piling on the pressure, as senator John Cornyn last week called for the Trump administration to conduct a review into the bid.
Qualcomm has been fighting to retain its independence, maintaining that Broadcom's gradually increased cash and share offer undervalues the company.
A growing trend
City law firm Herbert Smith Freehills warned in a recent report that foreign investment screening was a growing trend, and was here to stay.
It noted that "major changes" were happening to both formal policy frameworks and the way they are used, as "increasingly assertive" politicians are adopting new strategies to influence deals.
"Policy makers are walking a balancing act, seeking to ensure they do not deter necessary investment by excessive protectionism, whilst managing political sensitivities about foreign investment and exerting control over its terms," said Herbert Smith Freehills' Veronica Roberts.
"It is essential that deal parties take into account not only the formal legal requirements, but also how authorities/governments apply these in practice, and how this is influenced by the prevailing political landscape."