Daily Management Review

In Blow To China's Buying Spree, U.S. Toughens Stance On Foreign Deals: Reuters


07/21/2017




In what is a historically high number that bodes poorly for China's overseas buying spree, a secretive U.S. government panel has objected to at least nine acquisitions of U.S. companies by foreign buyers so far this year, reported Reuters quoting sources familiar with the matter.
 
Becoming more risk-averse under U.S. President Donald Trump is the Committee on Foreign Investment in the United States (CFIUS), which reviews acquisitions by foreign entities for potential national security risks, and this is indicated by the objections.
 
At t a time when the Chinese government is also restricting the flow of capital out of China following a bonanza of Chinese overseas deals, Chinese companies and investors eyeing U.S. assets could face more roadblocks as a result.
 
Noting the highest on record and up from 77 deals in the corresponding period in 2016, there have been 87 announced acquisitions of U.S. companies by Chinese firms so far in 2017.
 
There is growing political and economic tensions between the United States and China and CFIUS's more conservative stance toward deals coincides with that tension. Aimed at reducing the U.S. trade deficit with China, the two countries failed to agree on major new steps on Wednesday.
 
Notifying that deals would be blocked based on measures they have proposed to address potential national security risks, CFIUS has sent letters to companies involved in at least nine deals since the start of the year, reports Reuters citing people familiar with the matter.
 
Sources said that the technology sector is the area of many of these deals. lawyers who represent companies before CFIUS said that it is more difficult to establish whether a deal poses any threat because of a rise in cyber security threats and rapid advances in technology.
 
However, it does not mean that a deal is killed immediately by an initial objection by the watchdog.
 
While some have pulled their applications and canceled their deals, other companies this year have chosen to keep their CFIUS filings alive by proposing new mitigation measures, sources reportedly said.
 
"CFIUS decisions are highly sensitive and we are not going to comment on rumors of their outcome," a White House spokeswoman said.
 
There were no comments from a spokesman at the Treasury Department. with Treasury Secretary Steven Mnuchin serving as chairman, Treasury leads CFIUS.
 
 
There has been no announcement of most of the deals that CFIUS has sought to block this year. Texas oil producer ExL Petroleum Management LLC, which sought to sell its assets to Russian billionaire Mikhail Fridman's L1 Energy and U.S. electronics maker Inseego Corp, which tried to sell its MiFi mobile hotspot business to Chinese smartphone maker TCL Industries Holdings, are among the companies that have disclosed they have withdrawn their CFIUS applications and canceled their deals.
 
Nine deals were withdrawn after CFIUS began an investigation, in comparison, in the entirety of 2014, the last year for which CFIUS has released official data.
 
Amid delays after Trump took office in filling important mid-level political positions at several of the 16 government departments and agencies that comprise CFIUS, several more companies face protracted CFIUS reviews.
 
(Source:www.reuters.com) 






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