U.S. says Broadcom review confirms security concerns

(Reuters) - The U.S. Treasury Department has told Singapore-based Broadcom Ltd (AVGO.O) that it has confirmed national security concerns about the chipmaker’s unsolicited bid to buy rival Qualcomm Inc (QCOM.O) and accused it of violating an order to give sufficient notice of plans to move to the United States.

The Treasury Department’s complaints, outlined in a letter to Broadcom on Sunday, potentially make a deal between Broadcom and Qualcomm less likely, but the final decision could be made by U.S. President Donald Trump. Qualcomm has so far rebuffed Broadcom’s $117 billion offer.

The Committee on Foreign Investment in the United States (CFIUS), a multi-agency panel led by the Treasury Department that reviews national security implications when foreign entities take over U.S. corporations, has already launched an investigation, even though Broadcom and Qualcomm have not yet signed any deal.

“(The) investigation has so far confirmed the national security concerns,” the Treasury’s letter to Broadcom said. “In the absence of information that changes CFIUS’s assessment of the national security risks posed by this transaction, CFIUS would consider taking further action, including but not limited to referring the transaction to the president for decision.”

In November, Trump announced and applauded Broadcom’s decision to move its headquarters to the United States, calling the company “one of the really great, great companies.” He has not spoken about the matter recently.

In the Treasury’s letter to Broadcom, top CFIUS official Aimen Mir also said Broadcom “took a series of actions in violation” of a March 4 order from the Treasury which required CFIUS to be notified five business days before taking any action toward moving back to the United States, where Broadcom was founded.

Broadcom, incorporated in Singapore and co-headquartered there and in San Jose, California, denied that.

“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,” the company said in a statement.

The Treasury’s letter was addressed to lawyers for Broadcom and Qualcomm, and was made public by Qualcomm. Qualcomm declined comment. The U.S. Treasury did not respond to a request for comment.

Shares of Broadcom rose more than 3 percent while Qualcomm’s stock edged lower.

Broadcom said on Monday it intends to become a U.S. corporation before any deal with Qualcomm, a process it said would be finished by April 3.

Due to the CFIUS investigation, Qualcomm delayed by a month to April 5 its annual meeting, during which shareholders will vote on Broadcom’s slate of six nominees to Qualcomm’s 11-member board.

Since disclosing its first bid, worth $103 billion, for Qualcomm on Nov. 6, Broadcom has revised its bid twice, but is yet to strike a deal.

The Wall Street Journal reported on Friday that Intel Corp’s (INTC.O) competitive concern about Broadcom’s attempt to buy mobile chip rival Qualcomm had led it to consider a range of acquisitions in response, including a bid for Broadcom. Intel has played down the reported interest.