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Lattice Weighs Seeking Trump’s Intervention on China Deal

Updated on
  • U.S. security review of chip manufacturer’s sale set to expire
  • Lattice CEO said to be in Washington seeking support for deal

Lattice Semiconductor Corp. is considering seeking President Donald Trump’s approval of its proposed takeover by a China-backed buyer after a secretive national security panel repeatedly rebuffed the companies, according to a person familiar with the matter.

Going to Trump is among the options the companies are considering for the $1.3 billion deal, including extending talks with the security panel or walking away from the transaction, said the person, who asked not to be named because a final decision hasn’t been made. It’s almost unheard of for companies to seek a presidential review in a foreign takeover of a U.S. company rather than terminate a deal.

Lattice’s Chief Executive Officer Darin Billerbeck is in Washington this week making a last-ditch effort to persuade government officials to support the deal, another person said, as the review by the panel is about to expire. Lattice and the buyer, Canyon Bridge Capital Partners, have proposed measures they say would address U.S. concerns while allowing the deal to proceed, according to that person.

Oregon-based Lattice and Canyon Bridge are nearing the end of their third, 75-day review period by the Committee on Foreign Investment in the U.S., or CFIUS, since they struck the agreement last November. The panel, which is led by the Treasury Department and includes officials from the Commerce, State and Defense departments, reviews acquisitions of American companies by foreign buyers for national security risks.

Lattice and Canyon Bridge declined to comment. CFIUS doesn’t comment on its reviews, which are confidential.

Lattice shares spiked 3.5 percent on the news and were down less than 1 percent to $5.70 at 2:34 p.m. in New York.

Beijing Backer

While Canyon Bridge is a private-equity firm with a Silicon Valley address, the money behind the deal comes from Beijing. CFIUS has taken a tough line against China’s campaign to acquire semiconductor technology and develop its domestic chip industry.

The U.S. has portrayed China’s investment push -- $150 billion over 10 years -- as a risk to U.S. national security, and the panel’s review of the Lattice deal will put the Trump administration’s stamp on the issue. Lattice is one of the few makers of programmable logic chips, which have a wide variety of uses because their attributes can be changed using software. Such semiconductors are frequently used in components for military communications.

When CFIUS sees risks to U.S. national security, it can impose changes to a deal. If its concerns can’t be resolved, the panel sends a recommendation to the president to block it. Only the president can stop a foreign takeover, though he could also overrule the panel’s recommendation. Companies generally abandon transactions rather than risk a presidential block, which leaves a prospective buyer branded as a national security threat.

Aixtron Blocked

Last year, President Barack Obama upheld a recommendation by CFIUS to block the sale of semiconductor-equipment supplier Aixtron SE to a Chinese buyer because of the military applications of Aixtron’s technology. That was only the third time in more than a quarter century a president has blocked a foreign takeover on national security grounds. 

If the deal falls apart or is blocked by the president, it would add to a string of foreign takeovers of American companies that have failed to get national-security approval from the Trump administration. Buyers have walked away from at least four takeovers this year, with a fifth deal poised to fall apart this week. Three of the deals involved Chinese buyers: HNA Group Co.’s investment in Global Eagle Entertainment Inc., an in-flight entertainment and internet-services provider, T.C.L. Industries Holdings purchase of Inseego Corp.’s mobile-broadband business, and Zhongwang USA LLC’s proposed takeover of aluminum product maker Aleris Corp., which expires Aug. 31.

The Lattice deal is among several under review by CFIUS that have been slowed because many departments are still awaiting senior-level staff under the Trump administration. The panel is also grappling with a record number of filings. Deal reviews are getting bogged down even for more routine investments from countries friendly to the U.S., according to lawyers who work on cross-border transactions.

Chinese Scrutiny

Still, Chinese deals tend to get the most scrutiny. Chinese access to Americans’ personal data, including Social Security and bank account numbers, has become a particular concern, especially involving individuals with security clearances, the people said. Canyon Bridge, a private-equity fund with offices in California and Beijing, is investing on behalf of a Chinese venture capital fund that, according to regulatory filings, is sponsored by China Reform Fund Management, a state-owned asset manager.

Trump’s harsh criticism of China has led some analysts and lawyers to question whether Washington might take a tougher stance on Chinese ownership of American businesses, particularly in technology and critical infrastructure.

Another Chinese takeover that has run into hurdles with CFIUS is MoneyGram International Inc.’s sale to Ant Financial, the financial-services company controlled by Chinese billionaire Jack Ma. HNA’s agreement to buy a stake in Anthony Scaramucci’s SkyBridge Capital LLC is nearing the end of its review.

Lattice said in June the Canyon Bridge agreement would be refiled with CFIUS to give the panel more time to review the deal. CFIUS has a maximum of 75 days to consider transactions, which often forces companies to pull and refile their applications if the period expires without a decision. Lattice and Canyon Bridge may not be able to restart the clock again if CFIUS declines to accept a fourth filing.

— With assistance by Miles Weiss

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