Photographer: Tomohiro Ohsumi/Bloomberg

China Tops Foreign Buyers Drawing U.S. M&A Security Reviews

  • National security panel reviewed 24 notices from Chinese firms
  • CFIUS 2014 report offers rare glimpse of secret panel's work

It’s official: The U.S. is reviewing more foreign acquisition proposals -- and more from China -- than it has in years, according to Treasury Department figures released Friday.

The numbers, in a report to Congress, provide an annual glimpse into the secretive U.S. process of vetting the national security implications of international corporate tie-ups. The report for 2014, the latest full year reviewed, shows that U.S. officials combed through security risks of the most deals since 2008. Among them were 24 proposals for Chinese acquisitions of U.S. assets out of a total of 147. The total for China represents a new high and marks the third year in a row that it topped other countries.

The report confirms a U.S. security focus on China that has likely become more pronounced since 2014. Chinese investors are on a buying spree in the U.S. this year, setting a pace that could top last year’s record in cross-border investments. 

In particular, Beijing has pushed investment in U.S.-based semiconductor businesses as a way to build its domestic chip production and lessen its dependence on foreign technology. In an era of growing concerns over intellectual property theft and cyber attacks, the latest proposed deals have raised concerns from lawmakers worried about risks to national security.

That has put the spotlight on the panel -- the Committee on Foreign Investment in the U.S., or CFIUS -- which has taken a hard look recently at deals that would have put U.S. intellectual property in Chinese hands.

While the panel can recommend that the U.S. president block deals, few contentious reviews reach that point: In January, Dutch company Royal Philips NV said it was canceling the sale of its lighting-components business to a Chinese-led consortium due to concerns from the panel. CFIUS’s reviews also appear to have had a chilling effect on potential deals: Fairchild Semiconductor International Inc. this week rejected a takeover bid by Chinese buyers, saying there was too much risk that CFIUS would oppose the deal. 

The panel is led by Treasury and includes officials from the Defense, State and Homeland Security departments. It can impose conditions on transactions to address security concerns such as restricting non-U.S. citizens’ access to products and services. Its deliberations are confidential, and apart from its annual report to Congress, it doesn’t comment on its work even after it is completed.

After China, the top buyers of U.S. assets in 2014 were from the U.K., Canada and Japan, according to the report. The 147 notices filed with CFIUS rose more than 50 percent from the 97 filed in 2013. Manufacturing accounted for most of the investments in 2014.

Among the deals now under review are China National Chemical Corp.’s takeover bid for Syngenta AG, Western Digital Corp.’s proposed sale of a 15 percent stake to Tsinghua Unisplendour Corp., and the planned sale of the Chicago Stock Exchange to Chongqing Casin Enterprise Group.

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