Regulatory green light for Beijing-controlled semiconductor group’s Akrion purchase
After a series of Chinese acquisitions of US assets were torpedoed by the US government in 2017 over national security concerns, Washington cleared its first Beijing-backed takeover of an American company since Donald Trump became president a year ago.
Naura, a Chinese state-controlled semiconductor company, received US regulatory approval for the purchase of Akrion Systems, a Pennsylvania-based rival, in December, a law firm representing the buyer said on Wednesday.
The decision by the Committee on Foreign Investment in the US to approve the deal could weaken widespread fears among business leaders that the Trump administration is using the inter-agency vetting of deals that pose national security risks as a new tool against China and its growing appetite for American technology.
“Despite a heightened US government review of Chinese investments, the parties obtained the Cfius approval in less than three months,” said a spokesperson for Gibson Dunn, which represents Naura. “This accomplishment is especially significant in light of the US government’s noted concerns about Chinese acquisitions in general, and semiconductor company acquisitions in particular. To make the Cfius approval even more noteworthy is that Naura is also a state-owned company.
” It follows the recent decision by Ant Financial, the digital payments arm of Chinese ecommerce group Alibaba, to scrap a $1.2bn takeover of Dallas-based MoneyGram after it failed to convince Cfius that the deal did not pose a national security threat.
In November Liu Zhongtian, a Chinese metals entrepreneur, abandoned a $2.3bn deal to acquire US aluminium producer Aleris, while Cowen, a New York-based boutique investment bank, scrapped a $275m investment from CEFC China Energy, blaming “uncertainty” in securing Cfius approval.
Chinese bids for semiconductor companies have attracted particular interest from Cfius and US administrations. In an unusual move the Obama administration left Mr Trump a special report urging a co-ordinated government plan to defend the US’s semiconductor industry.
In September Mr Trump blocked the $1.3bn bid for Lattice Semiconductor by a group of investors that included a Chinese state-controlled fund.
Chinese investors and US dealmakers claim that more deals are being stalled or blocked by Cfius due to rising tensions between Beijing and Washington. People who work on cases before the committee say it has also been plagued by problems because of a lack of Trump appointees to serve on it and a rising caseload.
US lawmakers introduced a bipartisan bill in Congress in November seeking to reform Cfius by broadening the remit of the inter-agency, which is chaired by the US Treasury and includes the department of defence, state, commerce and homeland security.
Since the start of 2016, nearly 30 Chinese acquisitions of US target companies have been announced but not yet completed, according to Dealogic.
Some of the most noticeable deals still pending are Oceanwide’s $2.7bn acquisition of Genworth Financial, as well as the sale of Anthony Scaramucci’s SkyBridge Capital hedge fund to HNA Capital.
Chinese foreign direct investment into the US fell by a third to $29bn in 2017, according to data compiled by consultancy Rhodium for Baker McKenzie, the global law firm.
This is partly due to Chinese deals being stalled by US regulators as well as a Beijing-led crackdown of Chinese capital outflows — much of it being used to acquire inflated trophy assets such as hotels and European football clubs.