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Broadcom and CA trim their losses after the former says there was a 'fraudulent memo' calling for a CIFUS review of their merger (AVGO, CA)

Rand Paul

  • Broadcom and CA shares slid Wednesday after Senator Rand Paul (R-Ky.) called for a federal national security review of their merger.
  • Shares trimmed their losses after Broadcom said there was a "fraudulent memo" circulating around Congress that called for a CIFUS review of their merger.
  • Broadcom announced an $18.9 billion deal to acquire CA in July. 
  • That deal came after President Donald Trump, in March, blocked Broadcom's attempted purchase of the chipmaker Qualcomm, citing national security concerns.
  • Broadcom, a semiconductor company which was previously based in Singapore, registered itself as a US corporation in April. CA is an American software company.
  • Watch Broadcom and CA trade in real time here.

Broadcom and CA shares took a hit Wednesday, falling as much as 4%, after Axios reported Senator Rand Paul (R-Ky.), during a Senate hearing on homeland security, called for a federal national security review of their merger. 

But shares are rebounding after a statement from Broadcom said there was a "fradulent memo" that was "circulating among Senators and members of Congress referencing the possible need for review of Broadcom's acquisition of CA Technologies (NASDAQ: CA) by the Committee on Foreign Investment in the United States ("CFIUS")."

The company added: "Broadcom and CA Technologies are both American companies, and there is no basis in fact or law for CFIUS review of our pending transaction. We have received HSR clearance and the approval of CA shareholders, and we have a clear path to completing the transaction in the fourth calendar quarter of 2018."

Broadcom shares rebounded to a loss of 1.65% while CA shares trimmed their losses to about 2.4%.  

Broadcom, a semiconductor company which until April was based in Singapore, announced in July its intent to acquire the American software company CA for $18.9 billion in cash, in an effort to expand beyond processors.

Neither Broadcom nor CA asked for a review of their transaction by the Committee on Foreign Investment (CFIUS) in the US, but Paul, along with other leaders within the defense and energy communities, has been pushing for a CFIUS review anyway, Axios says, citing sources familiar with the matter.

"We will send you a letter advocating that CFIUS looks at this...," Paul said in a statement published by Axios.
He added that a combination of the two companies could cause national security concerns as CA's network systems are "deeply embedded in many of our critical infrastructure facilities and national security agencies."

This would not be the first time that Broadcom has faced strong backlash from political leaders who have national security concerns. In March, President Donald Trump blocked Broadcom's attempted purchase of the chipmaker Qualcomm, saying "there is credible evidence" leading him to believe that Broadcom, a limited company organized under the laws of Singapore, through control of San Diego-based Qualcomm "might take action that threatens to impair the national security of the United States."

Trump's decision led Broadcom to register itself as a US corporation in April, but Paul doesn't favor Broadcom's new American identity and still demands a national-security review of any potential acquisitions it tries to make.

"Just because Broadcom has changed its domicile to [the U.S.] doesn't mean we shouldn't look at Broadcom," Paul said.

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