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CFIUS: Interim Order, Requested Review – Wise Road Capital and Magnachip Semiconductor Corporation

Status:  Interim Order; CFIUS Requested Review

Abstract technological futuristic background, 3d renderingAcquirer:  Wise Road Capital LTD (China)

Acquired:  Magnachip Semiconductor Corporation (US)

Value:  US$1.4 billion

Industry:  Semiconductors

On March 25, 2021, Magnachip Semiconductor Corporation (“Company”), a publicly traded (NYSE: MX) Delaware corporation based in South Korea that designs and manufactures analog and mixed signal semiconductors, entered into a merger agreement with “South Dearborn Limited, an exempted company incorporated in the Cayman Islands with limited liability (‘Parent’) formed by an affiliate of Wise Road Capital LTD (‘Wise Road’),” whereby Magnachip Semiconductor Corporation would survive as a wholly owned subsidiary of South Dearborn Limited.  (Magnachip Semiconductor Corporation Form 8-K, June 16, 2021, SEC Filing.)   On May 26, 2021, “the CFIUS Staff Chairperson, acting on the recommendation of CFIUS, requested that the parties file a notice concerning the Merger and thereby undergo formal CFIUS review of the Merger. The Company and Parent filed such notice with CFIUS on June 11, 2021.”  (Id.)  “Under the terms of the Merger Agreement, the parties’ receipt of the request from CFIUS to file a notice concerning the Merger results in the closing of the Merger now being conditioned on the receipt of CFIUS approval without the imposition of a burdensome condition as defined in the Merger Agreement.”  (Magnachip Semiconductor Corporation Form 8-K, May 28, 2021, SEC Filing.)  On June 15, 2021, the U.S. Department of Treasury, on behalf of CFIUS, issued an “Order Establishing Interim Mitigation Measures” (the “Interim Order”) to the parties to impose a standstill requirement on the parties until CFIUS either clears the transaction, the President declines to take action, or the President revokes or terminates the Interim Order.” (Magnachip Semiconductor Corporation Form 8-K, June 16, 2021, SEC Filing.)

The parties did not originally file with CFIUS and believed it did not require “any approvals . . . in the United States.” (Magnachip Semiconductor Corporation Form 8-K, May 28, 2021, SEC Filing.)  Magnachip Semiconductor Corporation “is a holding company,” “[a]ll manufacturing and research and development activities take place in South Korea,” all sales operations are located outside the U.S. (in South Korea, China, Hong Kong, Taiwan, Japan and Germany), and all of the employees are based in South Korea or other locations “outside the United States.” (Magnachip Semiconductor Corporation Form 8-K, May 28, 2021, SEC Filing.)

© Copyright 2023 Squire Patton Boggs (US) LLPNational Law Review, Volume XI, Number 167

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