Magnachip, Wise Road Terminate Merger After Failing to Receive CFIUS Approval
Beijing’s Wise Road Capital and South Korea's Magnachip Semiconductor Corporation terminated their merger, the two companies said this week. They received permission to withdraw their filing with the Committee on Foreign Investment in the U.S. after being told that CFIUS would not approve Wise Road’s acquisition of Magnachip.
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The end of the merger deal completes a monthslong saga between CFIUS and the two companies, which were asked by CFIUS to file a notice in May after not voluntarily disclosing their deal (see 2106150039 and [Ref:2109010051]). After CFIUS couldn't identify measures to mitigate the deal’s national security risks, the two companies received permission in September to refile their notice and potentially propose other mitigation measures (see 2109160037 and 2109240038).
Ultimately, the two companies and CFIUS couldn’t strike a deal “despite months of effort,” they said in a Dec. 13 statement. Foreign investment lawyers said the deal was always unlikely considering the heavy scrutiny CFIUS places on Chinese investments in critical technologies, particularly surrounding semiconductors (see 2110140035).
Magnachip, which also plans to withdraw its investment notice with the Korean Ministry of Trade, Industry and Energy, will receive a $70.2 million fee under the termination agreement, the semiconductor company said in a Dec. 13 Securities and Exchange Commission filing. ”While we are disappointed by the termination of our merger agreement, we are confident that Magnachip remains well positioned to create value for our shareholders as an independent public company," Magnachip CEO YJ Kim said in a statement.