Sending a clear signal to Beijing that Washington will oppose takeover deals that involve technologies with potential military applications, U.S. President Donald Trump blocked a Chinese-backed private equity firm from buying a U.S.-based chipmaker.
The first announced deal for the buyout fund, which launched last year with a focus on technology investment, one of the largest attempted by a Chinese-backed firm in the U.S. microchip sector was the planned Canyon Bridge Capital Partners’ $1.3 billion acquisition of Lattice Semiconductor Corp.
The Lattice acquisition by a firm backed by the Chinese government was opposed against by U.S. defense officials subsequently.
Allowing companies to put their own software on silicon chips for different uses, Portland, Oregon-based Lattice makes chips known as field-programmable gate arrays. unlike its two biggest rivals, Xilinx Inc and Intel Corp’s Altera, it said it no longer sells chips to the U.S. military.
Trump said in an executive order that Lattice and Canyon Bridge “shall take all steps necessary to fully and permanently abandon the proposed transaction” within 30 days.
The Committee on Foreign Investment in the United States (CFIUS), which scrutinizes deals for potential national security threats, also had the same views as Trump’s decision.
U.S. Treasury Secretary Steven Mnuchin said in a statement following the decision that “CFIUS and the president assess that the transaction poses a risk to the national security of the United States that cannot be resolved through mitigation.”
the U.S. government’s use of Lattice products, the importance of semiconductor supply chain integrity to the U.S. government, the Chinese government’s role in supporting the deal, and the transfer of intellectual property, were related to the national security risk, Mnuchin added.
China expressed concern about the decision.
“We believe conducting security examinations of investments in sensitive sectors is a country’s legitimate right, but it should not become a tool for advancing protectionism,” Chinese Commerce Ministry spokesman Gao Feng told a press briefing on Thursday.
Gao said he hoped the United States would provide fair treatment to what was their “normal commercial behavior” and could view Chinese firms’ acquisitions objectively.
They had terminated the proposed deal. Lattice also said it is committed to achieving profitable growth, Lattice and Canyon Bridge said in a joint statement.
China and U.S relations are already strained over trade issues and North Korea and the announcement comes at such a sensitive time The Chinese Communist Party is also preparing to hold its once-every-five-years Congress in October.
The prolonged campaign by Canyon Bridge and Lattice to seal the deal was also ended by Trump’s decision. In trying to unsuccessfully persuade CFIUS to clear the acquisition, Canyon Bridge and Lattice had spent more than eight months.
Since it was announced last November, investors have been skeptical the Lattice deal would get passed. Lattice shares were down 1.6 percent in after-hours trading on Wednesday and have been trading below the deal’s $8.30 offer price.
China Oceanwide Holdings Group Co Ltd’s $2.7 billion acquisition of U.S. insurer Genworth Financial Inc. and Ant Financial’s $1.2 billion purchase of U.S. money transfer company MoneyGram International Inc are among the Chinese deals awaiting approval.
(Adapted from Reuters)