Chinese bid for mapping company falls at US hurdle

Chinese seeking stake in Europe-based Here told to ‘apply directly’ to Trump 
By Yuan Yang in Beijing

Chinese investors seeking to buy a stake in a European mapping company were told to “apply directly” to the US president after their €241m offer failed to win regulatory approval, according to one of the bidders.
Beijing-based NavInfo, a mapping provider for tech giant Tencent, together with Tencent and Singapore’s sovereign wealth fund GIC agreed last year to buy a 10 per cent stake in Amsterdam-headquartered Here to provide high-resolution maps of China for autonomous cars.
The mapping technology company is owned by German carmakers Audi, BMW and Daimler, and US chipmaker Intel.
The Committee on Foreign Investment in the US weighed in on the deal, which received the green light from German regulators in January, due to Here’s assets in Chicago.
Cfius made NavInfo and its fellow investors go through multiple hoops, but did not ultimately approve the deal.
“[Cfius] didn’t stop us from reapplying again, and actually recommended we apply directly to US President Donald Trump,” said NavInfo.
“We think there are two main reasons: the whole atmosphere after the election has changed at Cfius, and we hear there are not enough employees,” the company added, suggesting the new and smaller team at Cfius was more likely to withhold approval. 
The Here decision comes at a time when China-US relations have been strained by Mr Trump’s harsh rhetoric against Chinese trade, as well as foreign policy disagreements over North Korea.
Mr Trump earlier this month blocked a $1.3bn plan by Canyon Bridge, a China-backed private equity group, to acquire Lattice Semiconductor.
Financial holdings company China Oceanwide is in the midst of re-filing an application to Cfius to acquire Virginia-based insurer Genworth Financial for $2.7bn.
As Beijing has moved to rein in an ambitious spate of offshore dealmaking by private groups, Chinese outbound investment by government-backed groups soared in the first half of the year to $28.7bn, despite scrutiny overseas over national security concerns.
“For the past six months [Cfius] has continuously asked us to change our application, but even the emails they gave us were very vague, and just mentioned ‘national security reasons’,” NavInfo said on Wednesday.
NavInfo said Cfius had told the consortium to refile its application, which it did, giving up investor rights such as shareholder votes, but the group still did not receive approval and does not understand why.
The consortium decided to drop the deal rather than apply directly to the US president, NavInfo said. The company added that although the decision changes its plans for shareholding, it will not affect its mapping projects with Here, with which it has a joint venture in China.
NavInfo said it will cancel the loan it had arranged with BNP Paribas to finance its part of the acquisition.
Tencent and GIC did not immediately respond to requests for comment.

Chinese Peril

Trump Blocks China Bid to Buy U.S. Chip Maker
By ANA SWANSON

Lattice Semiconductor offices in San Jose, Calif., in 2007. President Trump prevented the acquisition of Lattice by an investor group with ties to Beijing.

President Trump on Wednesday blocked a China-backed investor from buying an American semiconductor maker over national security concerns, a rare move that could signal more aggressive scrutiny of China’s deal-making ambitions.
The deal for Lattice Semiconductor has provided a test of the president’s economic and diplomatic relationship with China.
On the campaign trail, Mr. Trump reserved some of his harshest words for China, accusing the country of stealing jobs. 

In recent months, the president has turned more critical of Beijing, accusing it of failing to do more to restrain the nuclear ambitions of North Korea.
Derek M. Scissors, a resident scholar at the American Enterprise Institute who studies Chinese investment, said that the administration’s decision over Lattice was intended to send a political message. 

“We could let it die quietly,” he said, “but we’re going to kill it loudly.”
The White House said on Wednesday that it prevented the acquisition of Lattice Semiconductor, in part because the United States government relies on the company’s products. 

The integrity of the semiconductor industry, it said, was vital.
The White House also raised concerns over the buyer’s close ties to Beijing. 

The investment group included China Venture Capital Fund Corporation, which is owned by state-backed entities, the White House said.
The decision could foretell trouble for other Chinese deals under review by the Committee on Foreign Investment in the United States, a multiagency group that examines takeovers of American companies by foreign buyers and makes recommendations to the president. 

The group, which operates largely in secrecy, is also looking at the proposed purchase of MoneyGram International by Ant Financial, an affiliate of the Chinese technology giant Alibaba Group.
Chinese deal-making in the United States has surged in recent years, as cash-rich companies look overseas to diversify and spread their wealth. 

Last year, Chinese investment hit $46 billion, a threefold increase from 2015 before, according to the research firm Rhodium Group.
The flow of Chinese money into the country, although it has slowed lately, has prompted concerns over the state’s influence in corporate strategy. 

Critics are particularly worried that China is focusing on sensitive industries, like technology. 

White House officials and lawmakers on both sides of the aisle are pushing for new rules that would keep closer tabs on deals by China, by expanding the powers of the foreign investment committee, known as Cfius.
Mr. Trump has sought to take a tough line on China’s trade and investment practices, threatening on the campaign trail to enact sweeping tariffs. 

In August, the White House began an investigation into Chinese violations of American intellectual property, an inquiry that could result in tariffs or another negotiated outcome. 

Mr. Trump also called for a report on the steel industry, where China is dominant.
By blocking the deal for Lattice Semiconductor, the president is taking direct aim at China’s industrial policy.
As China looks to expand its global reach and support its economic growth, the government wants to be a dominant force in cutting-edge industries. 

The country’s “Made in China 2025” program, which will provide extensive assistance and cheap loans to certain industries, lays out an ambitious plan to build homegrown giants that will compete with American stalwarts.
Semiconductors has been a major focus of the effort. 

As China moves to build and design chips, Chinese investors has acquired overseas chip makers and teamed up with Western technology giants.
The deal for Lattice Semiconductor played to those ambitions.
The company announced an agreement last November to sell itself to a private equity firm, Canyon Bridge Capital Partners, for $1.3 billion. 

The initial funding for the firm, based in Palo Alto, Calif., came from China.
Cfius raised warning flags about the deal. 

Although the review process takes place behind closed doors, Lattice disclosed on Sept. 1 that the committee planned to recommend that the president to block the deal.
When that happens, companies usually drop their acquisition plans. 

Last year, Philips, the Dutch electronics giant, called off a deal to sell a big stake in its automotive and LED components business over Cfius concerns. 

The buyer was a consortium with GO Scale Capital, an investment fund sponsored, in part, by GSR Ventures of China.
Lattice instead tried to appeal to the president. 

In a filing, the company said it would offer measures to resolve any outstanding national security concerns.
The administration was not convinced. 

Treasury Secretary Steven Mnuchin, the chairman of the review committee, said in a statement on Wednesday that its recommendation on the deal was “consistent with the administration’s commitment to take all actions necessary to protect national security.”
“Cfius and the president assess that the transaction poses a risk to the national security of the United States that cannot be resolved through mitigation,” Mr. Mnuchin said.