Caixin
Dec 15, 2021 04:24 AM
TECH

Wise Road Drops $1.4 Billion Buyout of Magnachip

What’s new: Chinese private equity firm Wise Road Capital and U.S. chipmaker Magnachip Semiconductor Corp. terminated their $1.4 billion all-cash merger agreement reached in March, the companies said Tuesday.

The termination resulted from a failure to obtain approval by the Committee on Foreign Investment in the United States (CFIUS), Wise Road and Magnachip said in a statement.

In an August letter to Magnachip, the U.S. Treasury Department said the CFIUS found that the deal posed risks to national security and ordered in June that the deal be put on hold.

Wise Road will pay Magnachip a termination fee of $70.2 million, of which $51 million will be paid promptly and $19.2 million will be deferred and payable by March 31, 2022, the companies said.

Under the proposed deal, Magnachip’s investors were to receive $29 for each share, 75% more than the company’s three-month average stock price.

The background: Magnachip, a 2004 spinoff from SK Hynix Inc., is world’s second-largest maker of OLED display chips used on smartphones and televisions. Magnachip and Samsung Display Co. Ltd. together dominate about 90% of the global market.

Wise Road Capital, a Beijing-based private equity firm, is switching its focus to China. The company, partnering with Beijing Jianguang Asset Management Co. Ltd., recently beat out Alibaba Group Holding Co. Ltd. to become strategic investors in Chinese chip conglomerate Tsinghua Unigroup.

In the past few years, Jianguang Asset and Wise Road Capital have jointly completed a large number of overseas investments and mergers and acquisitions in sectors including chip design, wafer manufacturing and semiconductor materials, with a total investment of more than 60 billion yuan.

Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full story in Chinese, click here.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (hello@caixin.com)

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