A Chinese private equity fund manager must obtain approval from the Committee on Foreign Investment in the U.S. before completing its transaction with a South Korean semiconductor company, a June 4 Securities and Exchange Commission filing said. Beijing-based Wise Road Capital and South Korea-based Magnachip Semiconductor, which has offices in the U.S., were told by CFIUS last month to submit a “notice concerning” Wise Road's buy of Magnachip, Magnachip said, which is now “conditioned on the receipt of CFIUS approval.” The two companies plan to file a joint voluntary notice, and Magnachip said it expects the deal's timeline to be delayed. Magnachip added that it doesn’t believe the transaction “will require any approval” in South Korea but plans to cooperate with the South Korean government if it has questions.
Countries need to revise their foreign direct investment screening environments, which are contributing to a global drop in FDI, said Simon Evenett, a trade and economics professor at the University of St. Gallen. Evenett, who co-wrote a recent report arguing for a policy reset around FDI (see 2106030034), said a rise in screening tools is chilling investments and creating uncertainty over a range of industries.
President Joe Biden said the U.S. is committed to an open investment environment and remains the “most attractive place in the world” for business despite the sometimes rigorous foreign investment screening by the Committee on Foreign Investment in the U.S. While the U.S. “will always protect our national security, and certain foreign investments will be reviewed” by CFIUS, the U.S. wants to maintain a “level playing field,” Biden said in a June 8 statement. “We believe that our country -- and our world -- are safer, more resilient, and more prosperous because of the investment of foreign-owned companies in the United States,” he said. “As the United States faces increasing competition for the jobs and industries of the future, we will remain the destination of choice for investors around the world.”
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Companies are increasingly straying from foreign direct investment, partly due to challenges faced by the ongoing COVID-19 pandemic and a rise in global investment screening, researchers said in a June 3 report. FDI requirements and thresholds have specifically become more “far-reaching” over the past five years, the report said, and businesses continue to face mounting regulatory risks, which has chilled investment in a range of sectors. “Once a hallmark of globalisation” the report said, “FDI has been in trouble for some time.”
A congressional commission said the Commerce Department has “failed” to carry out its export control responsibilities over emerging and foundational technologies, which is hindering the work of other government bodies and allowing some sensitive dual-use technologies to be freely exported from the U.S. The commission said Commerce’s Bureau of Industry and Security, which is in charge of the export control effort, has taken “limited action to strengthen or introduce new controls” since its 2018 congressional mandate and should look to other agencies to help with the process.
The Committee on Foreign Investment in the U.S. approved a $30 million investment by Hanwha Systems, a South Korean defense technology company, into Kymeta, a U.S. satellite communications company, Kymeta announced May 26. Kymeta said CFIUS’ approval “clears the way” for the two companies to close on the transaction, which will help Kymeta’s “global market reach, accelerate production, and improve the overall growth trajectory of the company.” The companies announced the transaction in December.
A House lawmaker recently introduced a bill that would add the U.S. agriculture secretary as a member of the Committee on Foreign Investment in the U.S. The Agricultural Security Risk Review Act, which has been previously introduced both in the House and Senate, would allow the U.S. Department of Agriculture to have input in investment transaction reviews, Rep. Frank Lucas, R-Okla., said May 20. The bill comes during a time when foregn ownership of U.S. agricultural businesses is “steadily” increasing, Lucas said. He called the move “long overdue.” “I know firsthand just how important our agriculture industry is, which is why Congress must remove the hurdles that keep USDA from having a permanent seat at the table with CFIUS’ review of foreign transactions," Lucas said.
Republican Sens. Marco Rubio of Florida and John Cornyn of Texas introduced a bill to bolster the ability of U.S. foreign investment reviews to cover genetic information. The Genomics Expenditures and National Security Enhancement Act would require mandatory filings to the Committee on Foreign Investment in the U.S. for “any deal” that involves a company working with genetic information, Rubio said May 20. Under the bill, CFIUS would be required to consult with the Department of Health and Human Services on any deal that involves a “genetic data transaction,” which would increase “cross-agency awareness” of these transactions. The bill would also require CFIUS to include the Senate’s Select Committee on Intelligence and the Foreign Relations Committee in its briefings.
A U.S. commercial space company announced that it received a draft national security agreement (NSA) from the Committee on Foreign Investment in the U.S., which details requirements and conditions it must meet before CFIUS approves its transaction. The company, Momentus Inc., said it voluntarily notified CFIUS of its proposed business combination with Stable Road Acquisition Corp. but must resolve CFIUS’s “national security concerns” about Momentus’ foreign ownership and control, according to a May 14 news release.