Chinese fund abandons Xcerra deal, cites CFIUS problems

Unic Capital Management, an affiliate of Sino IC, agreed to buy Xcerra in April 2017 for around $580 million, using Hubei Xinyan Equity Investment Partnership. The deal won shareholder approval but failed to receive clearance from the Committee on Foreign Investment in the United States (CFIUS). The parties have now mutually agreed to abandon the transaction.

"Despite our best efforts to secure approval, it has become evident that CFIUS will not clear this transaction and we and Xinyan have mutually decided to terminate our merger agreement," said Dave Tacelli, president and CEO of Xcerra, in a statement. He added that discussions are ongoing as to alternative means of accelerating the company's growth in China.

Xcerra, formerly known as LTX-Credence, provides test and handling equipment, interface products, test fixtures and related services to the semiconductor and electronics manufacturing industries. The company does not design or manufacture semiconductor devices, but rather sells related products to designers and manufacturers. Sales reached $390.8 million in 2017, up from $324.2 million the previous year. Net profit rose from $11.1 million to $25.6 million over the same period.

Although most China-related transactions filed with CFIUS are cleared, approval has proven to be challenging in recent years for entities with US government contracts or technology deemed to be sensitive such as semiconductors and microchips. 

Canyon Bridge Capital Partners sought to win approval for its acquisition of Lattice Semiconductor last year by going over the committee's head and appealing directly to President Donald Trump. He vetoed the deal. More recently, Alibaba Group's Ant Financial has abandoned its $1.2 billion acquisition of private equity-backed MoneyGram after failing to receive clearance.

Founded in 2014, Sino IC is the sole manager of the government's RMB140 billion ($20.3 billion) China Integrated Circuit Industry Investment Fund. Domestic activity includes the acquisition of a 19% stake in computer chip maker Hua Hong Semiconductor for $400 million and a commitment of RMB50 billion to the purchase of a Tsinghua University unit focused on integrated circuits.

In 2016, the firm was involved in a EUR670 million ($711 million) bid led by China's Fujian Grand Chip Investment Fund for German semiconductor equipment maker Aixtron. The US government subsequently blocked the deal on security grounds related to Aixtron's US operations.

China consumes about $169 billion of microchips every year, more than any other country in the world. More than 90% of the country's integrated circuits are currently imported and the government plans to spend $150 billion over the next decade to develop the domestic semiconductor industry.

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• Topics
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