Fairchild Semiconductor rejects $2.6 bn bid from Chinese firms over regulatory concerns
17 February 2016
US chipmaker Fairchild Semiconductor yesterday rejected a $2.6-billion bid from Chinese state-backed enterprises China Resources and Hua Capital and instead opted to a lower offer from US-based ON Semiconductor.
Fairchild said that it rejected the offer based on US regulatory concerns.
Fairchild said there was an "unacceptable level of risk" that the deal would be rejected by the US Committee on Foreign Investment in the US (CFIUS).
CFIUS is an inter-agency panel led by the Treasury Department which overlooks overseas acquisitions to see that such deals do not pose any risk to national security.
In November 2015, ON Semiconductor, a Phoenix, Arizona-based company, agreed to buy rival chipmaker Fairchild for around $2.4 billion in cash (See: ON Semiconductor to acquire Fairchild Semiconductor in $2.4-bn deal).
The Chinese offer is $22 a share in cash, compared with ON Semiconductor's offer of $20 a share, but the possibility that CFIUS may reject the deal outweighed the attractiveness of the bid.
The $2.4 billion cash deal comes as the latest in a string of mergers and acquisitions in the semiconductor industry, with 2015 setting a record even before the year ended for the dollar value of deals.
Dealogic said there had been just over $118 billion in pending and completed deals last year, driven in part by two big deals, the $37 billion acquisition of Broadcom by Avago Technologies and Intel's $16.7 billion purchase of Altera.
According to another Gartner analyst Mark Hung, smaller to medium-size chip companies like ON and Fairchild needed to combine as they were "stuck in the middle" between innovative startups and giants like Intel that offered broader product portfolios, San Jose Mercury News reported.
In January this year, Dutch electronics group Royal Philips NV terminated its proposed $3.3-billion sale of its Lumileds business to Chinese private equity firm Go Scale Capital, after the CFIUS blocked the deal on national-security grounds.
Last year, Chinese state-owned semiconductor companyTsinghua Unigroup, aborted its planned $23 billion bid for chipmaker Micron over fears that CFIUS would torpedo the deal
CFIUS will now look into ChemChina's $44 billion proposed acquisition of Swiss agribusiness company Syngenta, which is the largest overseas deal by a Chinese company.