CFIUS greenlights Akrion sale to Naura

US regulators' approval comes amid tightening scrutiny of Chinese FDI

Beijing-based Naura Microelectronics Equipment Co Ltd announced it has finalized a deal to buy the United States' Akrion Systems LLC, a semiconductor manufacturing equipment company, following approval from the Committee on Foreign Investment in the United States.

"As far as we are aware, this is the first Chinese acquisition of a US company to be approved by CFIUS under the Trump administration," Gibson, Dunn& Crutcher LLP partner Fang Xue, one of the lawyers representing Naura in the deal, is quoted by Reuters as saying.

CFIUS is an interagency committee that reviews the national security implications arising from foreign investment.

Xue said the Akrion deal was approved by CFIUS during the standard 75-day review period, even as other companies have had to refile their applications to secure extensions. She added that Akrion, based in Allentown, Pennsylvania, faces financial difficulties because it lacks scale, and that the deal with Naura will boost its ability to compete.

Worth just $15 million, the deal is relatively small, yet it comes as CFIUS has tightened its scrutiny of Chinese companies looking to buy US assets, especially in the technology and financial sectors.

Earlier this month, CFIUS blocked the $1.2 billion purchase of Dallas-based US money transfer company MoneyGram International Inc by Ant Financial Services Group, which is controlled by Alibaba founder Jack Ma, whom US President Donald Trump praised last year.

Last September, the US blocked the $1.3 billion purchase of US chipmaker Lattice Semiconductor Corp by California-based Canyon Bridge Capital Partners LLC, a private equity firm with China connections.

Last week, Reuters reported that US lawmakers were urging AT&T to cut commercial ties to Chinese phone-maker Huawei Technologies and to reject plans by telecom operator China Mobile to enter the US market, because of national security concerns.

The news came just days after AT&T dropped its plan to sell Huawei's new smartphone in a last-minute announcement.

Reuters described CFIUS' approval of the Akrion deal as boding well for Xcerra Corp. The US semiconductor testing company's $580 million acquisition by Unic Capital Management Co Ltd, a subsidiary of China's Sino IC Capital Co Ltd and Hubei Xinyan Equity Investment Partnership, is also under CFIUS review. Like Akrion, Xcerra does not manufacture chips itself.

Late last year, the US Congress introduced the Foreign Investment Risk Review Modernization Act that seeks to expand CFIUS' power, primarily targeting Chinese investment.

Chinese foreign direct investment in the US dropped by 35 percent in 2017 to $29 billion after a record year in 2016, New York-based Rhodium Group said on Wednesday.

In terms of new activity, the drop was even sharper - the value of newly announced Chinese acquisitions in the US dropped by 90 percent compared to the previous year.

Rhodium attributed much of the decline to Beijing's regulatory crackdown on outbound capital flows, but cited growing regulatory hurdles in the US - mostly more complications getting clearance from CFIUS - as a "second punch to Chinese investors".