For those who came in late, US President Donald Trump blocked the chipmaker’s proposed acquisition on national security grounds. Word on the street is that Broadcom’s board met last night to formalise its plans and is expected to say something today.
The company will also drop its challenge to Qualcomm’s board. Moving back to the US will continue, even if it will cost the outfit $500 million a year under a higher tax rate, the sources added.
Being based in the United States as opposed to Singapore will allow Broadcom to make what it believes will be acquisitions of US companies that will not fall within the jurisdiction of the Committee on Foreign Investment in the United States (CFIUS), which analyses deals for potential national security concerns.
Analysts said Broadcom can still build heft through smaller deals. And it could have an easier time buying US targets if it goes through with plans to move to the United States.
Broadcom now has ample firepower for smaller deals, with about $11 billion in cash and the potential to generate nearly $9 billion in annual free cash flow, analysts estimate.
CFIUS, which raised concerns about the Qualcomm deal with Trump, listed the highly leveraged nature of Broadcom’s bid for its larger rival as a significant concern coupled with the risk of the US losing mobile technology leadership.