Wise Road withdraws after US blocks Magnachip bid
As a result, Magnachip will receive a termination fee of $70.2 million from South Dearborn Ltd.
South Dearborn Ltd. and Michigan Merger Sub Inc. – investment vehicles established by Wise Road Capital Ltd. and partners – offered $1.4 billion in cash for Magnachip in March 2021 (see Wise Road to buy power chip maker for $1.4bn). However, the Committee on Foreign Investment in the United States (CFIUS) insisted that the companies should apply to it for approval of the deal.
In addition, a second, higher-valued offer was made for Magnachip by London-based Cornucopia Investment Partners on behalf of itself and a group of investors that valued Magnachip at $1.66 billion. The second proposal came in two-days before Magnachip’s shareholders were due to vote on the first bid (see Magnachip in play with last minute rival bid). The board was at that time recommending acceptance of the Wise Road bid.
Magnachip announced that South Dearborn Ltd. and Magnachip Merger Sub Inc. have received permission from CFIUS to withdraw their joint filing in relation to their proposed merger transaction and will be terminating their previously announced definitive merger agreement.
This was because, after months of effort the companies had failed to obtain CFIUS’s approval for the merger, Magnachip said. The termination fee will comprise $51 million to be paid promptly and $19.2 million to be deferred up to March 31, 2022.
The company added that it withdraw its own application for approval of the merger that had been submitted to the Korean Ministry of Trade, Industry and Energy.
Next: Quote and protection plan
“While we are disappointed by the termination of our merger agreement, we are confident that Magnachip remains well positioned to create value for our shareholders as an independent public company,” said YJ Kim, CEO of Magnachip, in a statement.
Magnachip has adopted a one-year shareholder rights plan to prevent a dramatic change in the balance of ownership of the company while it considers its options. The rights plan is effective immediately and will expire no later than December 12, 2022.
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News articles:
Wise Road to buy power chip maker for $1.4bn
Magnachip in play with last minute rival bid
Chinese firm to buy Nexperia for $3.6 billion
Opinion: Is the West still blind to China’s ‘buy-the-tech’ strategy?
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