A Chinese tech firm has abandoned a multibillion-dollar investment in a US hard-disk manufacturer, state media reported yesterday, after the plan came under scrutiny from US lawmakers.
Unisplendour Corp (UNIS, 紫光) is to rescind its US$3.8 billion offer for approximately 15 percent of California-based Western Digital Corp, the Global Times reported.
The decision followed an announcement that the deal would be reviewed by the Committee on Foreign Investment in the US (CFIUS), a group tasked with examining outside acquisitions for potential national security concerns.
The announcement triggered a clause that allowed UNIS, a subsidiary of state-owned Tsinghua Unisplendour Group (清華紫光), to withdraw from the deal, Western Digital said in a statement on Tuesday.
The CFIUS has increased its scrutiny of Chinese firms as capital increasingly flows from China into the US.
Growth in the world’s second-largest economy has waned and Beijing has pushed local firms to look beyond the nation’s borders for deals that can both improve their balance books and strengthen their operations. As a result, eye-popping acquisitions of US companies by Chinese firms have become increasingly common.
The Unisplendour investment would have given the company a seat on Western Digital’s board and made it the largest shareholder. The company’s core business is hard drives and other storage devices.
Last week, the Chinese aviation and shipping conglomerate HNA (中國海航集團) agreed to pay US$6 billion for Ingram Micro, a California-based tech company that distributes products for Apple and Microsoft. Earlier this month, state-owned China National Chemical Corp (中國化工) offered US$43 billion for Swiss pesticide and seed giant Syngenta, which, if completed, would be the biggest-ever overseas acquisition by a Chinese company.
As the number of such deals has increased, so have reviews by US regulators. Over the past three years, the CFIUS has reviewed 68 Chinese acquisitions, more than any other nation, according to a report from the committee to the US Congress. The UK held the No. 2 spot with 45 reviews, followed by Canada with 40.
Bids in the manufacturing sector, especially in the category of “computer and electronic products,” were most likely to receive scrutiny, it said.
In 2014, the committee rejected only one of the 147 deals that were notified of the review process, the document showed.
Nevertheless, the heightened scrutiny has drawn complaints of unfairness from Chinese analysts.
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