China-US relations

American semiconductor firm Xcerra calls off sale to Chinese fund after hitting US regulatory wall

The two firms decide to end the US$580m deal as regulatory approval is unlikely

PUBLISHED : Friday, 23 February, 2018, 5:08pm
UPDATED : Friday, 23 February, 2018, 11:29pm

Xcerra, a US semiconductor company, has cancelled its US$580 million sale to a Chinese government-backed fund in yet another case of US regulators blocking Chinese takeovers of US tech firms amid the Trump administration’s toughened stance on such deals citing national security concerns.

Massachusetts-based Xcerra announced last year that Hubei Xinyan Equity Investment Partnership had agreed to buy the company’s all outstanding shares for US$10.25 per share in cash, which valued it about US$580 million.

“After careful review of feedback received from CFIUS [the Committee on Foreign Investment in the United States] that approval of the merger is highly unlikely and further discussions between the company and parent, the parties determined to cease efforts to seek CFIUS clearance and entered into a termination agreement,” Xcerra said on Friday in a filing to the US Securities and Exchange Commission (SEC).

No termination fees will incur, it added.

“Our transaction with Xinyan was about enabling Xcerra to accelerate its growth in the China market as well as broadening and strengthening our customer relationships around the world,” said Dave Tacelli, president and CEO of Xcerra, in a separate statement. “While we are disappointed that we were not able to receive approval from CFIUS on this transaction, Xcerra and Xinyan are discussing alternatives to pursue opportunities in new and existing markets in China.”

The CFIUS is the inter-agency committee which examines deals for national security risks that could lead to control of a US business by a foreign company.

Xcerra’s shares tumbled 2.6 per cent to US$9.45 in after-hours trading on Thursday on the Nasdaq stock market, after ending 0.6 per cent lower at US$¥9.7 in regular trading.

Hubei Xinyan Equity Investment Partnership was established last July and is controlled by a unit of state-backed Sino IC Capital, which manages China’s national semiconductor fund – China Integrated Circuit Industry Investment Fund.

US gives surprise go-ahead to Chinese acquisition of Pennsylvania semiconductor firm

Xcerra says it designs and manufactures equipment and other related products for testing semiconductors and printed circuit boards, which are used in a variety of industries including consumer electronics, automotive and industrial.

A number of Chinese acquisitions have collapsed since last year as the US government increased its scrutiny.

In January, the CFIUS rejected Ant Financial’s US$1.2 billion acquisition of US money transfer company MoneyGram International, a blow to Jack Ma’s efforts to expand China’s largest fintech service company, which he controls, into the US.

US political environment scuttles Ant Financial’s Moneygram deal

Ma is the executive chairman of Alibaba Group Holding and owns Ant Financial together with other Alibaba executives. Alibaba owns the South China Morning Post.

Last September, Trump blocked Canyon Bridge Capital Partners’ US$1.3 billion purchase of US chip maker Lattice Semiconductor, also on national security grounds.

HNA Group is currently awaiting US regulatory approval for buying a stake in SkyBridge Capital from Anthony Scaramucci, a former White House aide.

Still, some small deals managed to get through.

In January, Naura Microelectronics Equipment, a Beijing-based microchip company, received the green light from US regulators for its takeover of Pennsylvania-based Akrion Systems, a manufacturer of semiconductor devices. The deal is worth US$15 million, according to Naura.