Status: Presidential Order

 

Acquirer:  Canyon Bridge Capital Partners, Inc. (US); China Venture Capital Fund Corporation Limited (China)

Acquired:  Lattice Semiconductor Corp. (US)

Value:  Approximately US$1.3 Billion

Industry:  Integrated Circuits; Semiconductors


UPDATE:  On Wednesday, September 13, President Trump issued an “Order Regarding the Proposed Acquisition of Lattice Semiconductor Corporation by China Venture Capital Fund Corporation Limited.” (White House, Office of the Press Secretary, Presidential Order Sept. 13, 2017, hereinafter “Executive Order.”)  The Executive Order prohibits the acquisition of Lattice Semiconductor by Canyon Bridge Acquisition Company, Inc., and its affiliated entities: Canyon Bridge Fund I, LP, a Delaware limited partnership, its limited partner Yitai Capital Limited, a Hong Kong company, and Yitai Capital’s parent company China Venture Capital Fund Corporation Limited, a Chinese corporation.  (See id. at Section 1(a), referred to collectively as “Purchasers.”)  In addition to blocking the pending acquisition by the Purchasers, President Trump’s Order also prohibits “any substantially equivalent transaction, whether effected directly or indirectly by the Purchasers, through the Purchasers’ shareholders or shareholders’ immediate, intermediate, or ultimate foreign person beneficial owners, or through the Purchasers’ subsidiaries … .”  (Id. at Section 2(a).)  The parties must make weekly certifications to CFIUS concerning compliance with the Executive Order and certify to CFIUS within 30 days that the proposed transaction has been permanently abandoned unless an extension is granted by CFIUS.  (Id. at Section 2(b)-(c).)   Following the release of the Executive Order, the parties announced the termination of the proposed acquisition.  (See Lattice Semiconductor Press Release, Lattice Semiconductor and Canyon Bridge Capital Partners, LLC Announce Termination of Merger Agreement Following Decision from President Trump, Ex-99.1, Lattice Semiconductor Form 8-K, SEC Filing, Sept. 13, 2017.)

According to the White House Press Secretary, China Venture Capital Fund Corporation Limited “is a Chinese corporation owned by Chinese state-owned entities that manages industrial investments and venture capital.” (White House, Office of the Press Secretary, Statement from the Press Secretary on President Donald J. Trump’s Decision Regarding Lattice Semiconductor Corporation, Sept. 13, 2017.)  Secretary of the Treasury Steven Mnuchin, who heads the Department that manages the interagency committee of CFIUS, issued a concurrent statement about President Trump’s Order in which he described the operations of Lattice Semiconductor as a semiconductor manufacturer whose “primary semiconductor product lines are programmable logic devices, which are general purpose semiconductors that customers can program to provide functionality similar to chips that are designed and produced for specific applications.”  (See Press Center, Department of the Treasury, Statement On The President’s Decision Regarding Lattice Semiconductor Corporation, Sept. 13, 2017.)  Both Secretary Mnuchin and the White House summarized the US national security concerns as follows:  “[t]he national security risk posed by the transaction relates to, among other things, [1] the potential transfer of intellectual property to the foreign acquirer, [2] the Chinese government’s role in supporting this transaction, [3] the importance of semiconductor supply chain integrity to the U.S. government, and [4] the use of Lattice products by the U.S. government.”  (Id.; White House, Statement from the Press Secretary (numbering not in original).)  The parties have previously withdrawn and refiled a joint voluntary notification to CFIUS on two prior occasions.  (See prior blog posts below).

This marks the fourth time that a President has taken action under Section 721 of the Defense Production Act, the implementing statute of CFIUS.  Previously, on December 2, 2016, President Obama issued an order blocking the acquisition of Aixtron, Inc. (See Squire Patton Boggs Blog Post on the Aixtron transaction here).  President Obama issued another Order under Section 721 in 2012 against the acquisition of wind farms that were near a sensitive military facility.  (See Squire Patton Boggs Alert, Ralls v. CFIUS, July 16, 2014.) The only other Order was by President George Bush in 1990, ordering the divestiture of an aerospace parts manufacturer, MAMCO Manufacturing, Inc.  (See President George Bush, Order on the China National Aero-Technology Import and Export Corporation Divestiture of MAMCO Manufacturing, Incorporated, February 1, 1990.)


Posted September 6, 2017

Status: Recommendation to President

On September 1, 2017, Lattice Semiconductor Corporation disclosed in an SEC filing that CFIUS “indicated that it will recommend that the President of the United States suspend or prohibit the proposed merger (the “Merger”) between Lattice and an indirect wholly-owned subsidiary of Canyon Bridge Fund I, LP (“Canyon Bridge”), a private equity fund with China-based investors.”  (Lattice Semiconductor Corp. Form 8-K, Sept. 1, 2017, SEC Filing.) Lattice Semiconductor stated in that filing that it thinks the “transaction does not raise any national security concerns that cannot be addressed by the comprehensive mitigation measures that Lattice and Canyon Bridge have proposed to implement.”  (Id.) From this regulatory filing, however, it is unclear when exactly CFIUS’s recommendation will be made, or was made to the president. As of September 1, however, Lattice Semiconductor stated that the parties were still planning “further discussions with CFIUS and the President to explore measures that may resolve any outstanding national security concerns and that could allow the parties to proceed with the transaction.”  (Id.)

Once CFIUS “accepts” a filing or refiling, a 30-day review period starts, which is immediately followed by a 45-day investigation period.  (See generally, Subsections (b)(1)-(2), Section 721 of the Defense Production Act of 1950, as amended, codified at 50 U.S.C. App. 2170.) Once a 45-day investigation period ends, the President must render a decision within 15 calendar days. (See id. at Subsection (d)(2).) Lattice Semiconductor and Canyon Bridge previously “withdrew and re-filed their joint voluntary notice” to CFIUS on June 9, 2017, which would make September 1st the 84th day since that refiling. (Lattice Semiconductor Corp Form 8-K, Ex-99.1, Aug. 8, 2017, SEC Filing.) Given the number of days since the refiling on June 9, 2017, the process is likely soon to be, or already, with the President.


Posted August 10, 2017

Status: Withdraw and Refile (2nd time)

Lattice Semiconductor Corp. confirmed that “[o]n June 9, 2017, Lattice and Canyon Bridge Fund I, LP (“Canyon Bridge”) jointly withdrew and re-filed their joint voluntary notice to the Committee on Foreign Investment (“CFIUS”) …  to allow more time for review and discussion with CFIUS in connection with the proposed merger (the “Merger”) between Lattice and an indirect wholly-owned subsidiary of Canyon Bridge.” (Lattice Semiconductor Corp Form 8-K, Ex-99.1, Aug. 8, 2017, SEC Filing.)


Posted June 14, 2017

Status: Withdraw and Refile 

On June 9, 2017, Lattice Semiconductor Corporation, Canyon Bridge Acquisition Company, Inc., and Canyon Bridge Merger Sub, Inc. amended their merger agreement “pursuant to which the parties agreed to withdraw and re-file their joint voluntary notice to the Committee on Foreign Investment in the United States (CFIUS).” (Lattice Semiconductor Form 8-K, June 12, 2017, SEC Filing.) Under the amendment to the merger agreement, the parties agreed “to cause the joint voluntary notice submitted to CFIUS with respect to the transactions contemplated by the Agreement (CFIUS Case 17-006) to be withdrawn, as promptly as practicable, subject to an understanding that CFIUS will promptly initiate a new review of the transaction.”  (Amendment No. 1, Lattice Semiconductor Form 8-K, Ex-2.1, June 12, 2017, SEC Filing.)  The amendment also moved back the “outside date” for closing the transaction to September 30, 2017. (Id.).    The parties’ joint voluntary notice to CFIUS was submitted and accepted for review in January 2017, but had been withdrawn and refiled in March 2017.  (See previous blog posts on this matter below.)


Posted on March 31, 2017

Status: Withdraw and Refile

On Friday, March 24, 2017, Lattice Semiconductor Corporation announced, “Canyon Bridge Fund I, LP (“Canyon Bridge”) have jointly withdrawn and re-filed their joint voluntary notice to the Committee on Foreign Investment in the United States . . . to allow more time for review and discussion with CFIUS in connection with the proposed merger (the “Merger”) between Lattice and an indirect wholly-owned subsidiary of Canyon Bridge.”  (Lattice Semiconductor Corp., Form 8-K, Mar. 24, 2017, SEC Filing.)  Lattice and Canyon Bridge filed a final notice with CFIUS in late December 2016.  (See Lattice Semiconductor Corp., Schedule 14A, Dec. 28, 2016, SEC Filing.)  According to the recent announcement, “Lattice and Canyon Bridge have been actively engaged with CFIUS.”  .”  (Lattice Semiconductor Corp., Form 8-K, Mar. 24, 2017, SEC Filing.)   One public account of the refiling, citing to unnamed sources “familiar with the matter,” noted that another factor for the delay is the “vacancies left in senior positions at several government agencies more than two months after the inauguration of U.S. President Donald Trump [that] have reduced the panel’s capacity to review cases expeditiously.”  (Reuters, Exclusive: China-backed fund relaunches bid for U.S. chip deal approval – sources, Mar. 24, 2017.)  Lattice is also facing a shareholder lawsuit relating to the merger, file on January 9, 2017, Case No. 3:17-cv-00035 in the United States District Court for the District of Oregon.  (See Lattice Semiconductor Corp., Schedule 14A Proxy Statement, Jan. 27, 2017, SEC Filing.)


Posted on February 6, 2017

Status: Review

According to a recent securities filing on January 27, 2017, “[the parties have] filed a joint voluntary draft notice with CFIUS, have received comments from CFIUS staff on that draft notice, and have filed a joint voluntary final notice, which has been accepted, commencing the CFIUS review process.”  (Lattice Semiconductor Corp., Schedule 14A, Jan. 27, 2017, SEC Filing.)  The parties were awaiting acceptance of the filing by CFIUS in late December 2016.


Posted on January 5, 2017

On October 6, 2016, the parties’ representatives had “a meeting in Washington, D.C. with representatives of CFIUS to preview with CFIUS the potential transaction, including the parties involved.” (Lattice Semiconductor Corp., Schedule 14A, Dec. 28, 2016, SEC Filing.)

As of December 28, 2016, “[the parties] received comments from CFIUS staff on that draft notice, and have filed a joint voluntary final notice,” and are awaiting acceptance of the filing by CFIUS.  (Lattice Semiconductor Corp., Schedule 14A, Dec. 28, 2016, SEC Filing.)


Posted on December 13, 2016

Status: New Filing

During the week of December 5, “Canyon Bridge and Lattice jointly completed the pre-filing notification” with CFIUS and they are currently awaiting “CFIUS comment on the pre-filing,” after which they will submit a formal filing.  (Lattice Semiconductor Corp., Schedule 14A, Dec. 12, 2016, SEC Filing.)


Original Post on November 17, 2016:

Status: Upcoming/New Filing

On November 3, 2016,  Lattice Semiconductor Corporation, an Oregon based manufacturer of high-performance programmable logic devices, and Canyon Bridge Capital Partners, Inc., an investment fund based in Palo Alto, California, announced that Lattice Semiconductor entered into a merger agreement with Canyon Bridge Acquisition Company, Inc., whereby Lattice semiconductor will become a wholly owned subsidiary of Canyon Bridge for approximately US$1.3 billion.   (See Canyon Bridge Capital Partners Press Release, Nov. 3, 2016; Agreement and Plan of Merger in Lattice Semiconductor Form 8-K, Ex-2.1, Nov. 3, 2016.)  According to the agreement, the Committee on Foreign Investment in the United States (CFIUS) clearance is a condition to closing the transaction.  (See Agreement and Plan of Merger, Section 7.01(b)(iii), in Lattice Semiconductor Form 8-K, Ex-2.1, Nov. 3, 2016.)  Lattice Semiconductor “provides smart connectivity solutions powered by our low power FPGA, video ASSP, 60 GHz millimeter wave, and IP products to the consumer, communications, industrial, computing, and automotive markets worldwide.”  (See Canyon Bridge Capital Partners Press Release, Nov. 3, 2016.)  Canyon Bridge Capital Partners “is a newly formed, global private equity buyout fund, headquartered in Palo Alto, CA,” focused on technology companies.  (id.)  “Initial funding for Canyon Bridge comes from limited partners in China.” (id.)