Cotton argued that Chinese companies would have an advantage in the future if the USA allowed firms from overseas to take over certain American technology companies such as Qualcomm. CFIUS has determined that there are national security risks to the United States as a result of and in connection with the transaction proposed by Broadcom.
US officials told Reuters that members of Congress were concerned that Broadcom could sell part of Qualcomm to a Chinese firm.
The Committee on Foreign Investment in the United States (Cfius), a panel made up of different USA government departments, asked Qualcomm to delay its annual meeting for 30 days so that it could "fully investigate" Broadcom's proposed deal.
Qualcomm's shareholder meeting was set to include a vote on whether to replace six of its 11 directors with nominees put forward by Broadcom.
Gallagher also said a disruption of Qualcomm's research and development efforts "would in effect hand the growing competition for 5G to China". The order was placed to allow the subsidiary of the Treasury Department to investigate the acquisition maneuvers of Singapore-based Broadcom.
In a rare intervention by the government, the Trump administration moved Sunday night to stall the potential takeover of Qualcomm, the leading US chipmaker, by Singapore-based Broadcom on national-security grounds.
Still, while the government may not approve of the takeover, a CFIUS review does not necessarily mean the deal will be halted.
In a statement, Broadcom disclosed that Qualcomm had voluntarily requested CFIUS intervention on January 29 and told none of its shareholders. CFIUS, under former President Barack Obama and current President Donald Trump, has soured on high-tech deals, particularly involving semiconductors, or involving sensitive information about American citizens.
But Qualcomm, in a press statement, said "Broadcom's claims that the CFIUS inquiry was a surprise to them has no basis in fact" and that Broadcom had been interacting with CFIUS "for weeks".
Shares of Qualcomm qcom lost 1% to close at $64.01 on Monday, and remained well below Broadcom's offer price.
Unfortunately for Broadcom, that last point is playing out already due to action taken by the Committee on Foreign Investment in the United States (CFIUS).
Broadcom plans to complete a move of its headquarters from Singapore back to the United States by mid-May to remove a roadblock to the proposed deal, Reuters reported on Friday.
Trump praised the move at the time, calling Broadcom "one of the really great, great companies".
"Broadcom continues to pursue the redomiciliation process as expeditiously as possible", Broadcom said.
Qualcomm Inc. said late Monday that its annual shareholder meeting would be held April 5.
On Sunday, CFIUS instructed Qualcomm to delay by 30 days its annual shareholder meeting, which had been scheduled for Tuesday.
The deal was expected to face tough scrutiny from competition regulators.