Qualcomm is being asked to postpone its annual shareholder meeting. Source: Bloomberg

Regulators in the US have ordered Qualcomm, a leading US chip maker, to postpone a planned annual shareholder meeting. The federal regulators need more time to investigate any possible national security implications of a proposed Qualcomm takeover bid by the Singaporean chip maker and rival Broadcom. Broadcom is proposing to take over Qualcomm in a deal that could be the largest tech take over in history.

Details of the proposal were first made public in November last year. However, nothing has been agreed yet between the two companies. Qualcomm has also been pushing back on the proposed take over. The American company says that the bid has significantly undervalued it. Reports are also indicating that the delay was actually requested by the American company in an effort to stop Broadcom’s advances. It’s not clear whether this latest intervention will do anything to prevent this deal from going through.

Broadcom and Qualcomm are two of the biggest chip makers in the world. Source: Forbes

Broadcom and Qualcomm are regarded as two of the biggest chip makers in the world. Analysts say that if the proposed takeover goes through, Broadcom will become the single biggest chip maker and will dominate the global chip market. The decision to delay the deal was made by the Committee on Foreign Investment, a government panel that scrutinizes deals involving US companies for national security concerns.

The semiconductor industry is massive. A huge number of mobile devices in the market today rely on chips made either by Qualcomm or Broadcom. Last year alone, chip sales hit $410 billion. Broadcom has expressed its disappointment on this delay.

The Singapore-based company termed this as a desperate move by Qualcomm to entrench its current board of directors and deny shareholders the right to vote for the new nominees. Broadcom has proposed 6 new directors to join Qualcomm’s board. A vote on the nominees was to be conducted during the annual general meeting. Getting a majority in Qualcomm’s board would be a huge advantage for Broadcom. The Singaporean chip maker sees a board majority that favors the merger as essential in pushing the deal.

Qualcomm has maintained that there are seriuos security issues with the takeover proposal. Source: KPBS

However, the decision by the Committee on Foreign Investment appears to have stopped this strategy at least for now. The annual general meeting will be delayed for 30 days. The Committee on Foreign Investment will conduct investigations on the proposal and then will present its recommendation.

Qualcomm has maintained that there are serious regulatory and national security issues with the takeover proposal. The American company has accused Broadcom of trivializing this matter and misleading Qualcomm’s shareholders. The company also added that it will fully comply with the request by the Committee on Foreign Investment to delay the annual shareholder general meeting.

The Broadcom takeover bid is quite bizarre. The two companies have been rivals for years and while there is some logic in aligning their interests, the manner in which Broadcom has gone about this raises very serious ethical questions. Nonetheless, this delay gives Qualcomm some breathing room but we don’t know how long it will actually last.