Bass, Berry & Sims attorney Thad McBride provided insight on Tesla Inc.’s recent announcement of potential Saudi Arabian funding to take the company private and how this move could draw scrutiny from the Committee on Foreign Investment in the United States (CFIUS). “The big question is whether this technology is really sensitive enough and whether if acquired by a non-U.S. company it could have some kind of negative impact on U.S. national security,” Thad explained. Thad noted that this could be possible since the Trump administration has announced possible tariffs on auto imports for national security reasons.
Bass, Berry & Sims attorney Thad McBride provided insight for a Bloomberg Law article on how recently enacted reforms related to the Committee on Foreign Investment in the United States (CFIUS) will spur reviews of more transactions between U.S. companies and foreign investors.
In a Law360 article published on August 7, Bass, Berry & Sims attorney Thad McBride provided insight on how the Foreign Risk Review Modernization Act (FIRRMA) legislation included in this year’s National Defense Authorization Act (NDAA) would alter the Committee on Foreign Investment in the United States (CFIUS) by broadening its authority when reviewing foreign investments in the U.S.
As part of FIRRMA’s effort to broaden CFIUS’s power, the interagency committee will officially have the ability to review foreign investments in U.S. companies that hold personal information of U.S. citizens. While this has been an issue for potential foreign investors in the past (i.e. MoneyGram International Inc.), its formal inclusion in the legislation text takes it to another level.
- FIRRMA would significantly expand CFIUS jurisdiction.
- Mandatory filing would be required in some cases.
- Parties that protect and maintain personal information are likely to face more scrutiny.
As we have described in recent blog posts in March 2018, January 2018 and October 2017, a rash of proposed transactions have not survived the Committee on Foreign Investment in the United States (CFIUS) process. Most notably, as we described here, in March 2018, President Trump announced that he would not allow Singapore-based Broadcom to acquire U.S.-based Qualcomm, a rival chipmaker.
The president made his decision based on the recommendation of CFIUS, the U.S. government’s inter-agency committee that reviews transactions that could result in control of a U.S. business by a foreign person in order to determine if the transaction would have an effect on the national security of the United States.
On March 12, 2018, President Trump blocked Broadcom, a Singapore-based semiconductor manufacturer, from pursuing the purchase of U.S.-based Qualcomm, a rival chip maker. Broadcom’s offer, reportedly for $117 billion or perhaps even more, would have been one of the largest technology deals in history.
The president’s decision followed a determination by the Committee on Foreign Investment in the United States (CFIUS) that the transaction was likely to pose unacceptable national security risks to the United States. The president apparently made his decision shortly after Broadcom met with Pentagon officials in a final effort to salvage the deal.
- MoneyGram and Ant Financial mutually terminate $1.2 billion proposed merger
- CFIUS’s concerns focused on cyber and information security
- Scrutiny of buyers’ information security processes is likely to increase
By Thad McBride and Todd Overman with help from law clerk Nicole Giles
On January 2, 2018, U.S.-based MoneyGram International announced that its proposed acquisition by Ant Financial, a Chinese company owned by Alibaba, was being blocked by the U.S. Committee on Foreign Investment in the United States (CFIUS). CFIUS is the U.S. government’s inter-agency committee tasked with reviewing foreign entities’ purchases of and investments in U.S. companies when the transaction could pose a threat to U.S. national security.
In a November 8 article in the New York Times, I provided insight on increased scrutiny of foreign investments in the U.S by the Committee on Foreign Investment in the United States (CFIUS). Lawmakers recently introduced legislation that would expand CFIUS authority, at least in part due to lawmakers’ concerns about continuing Chinese investment activity in the U.S. This legislation follows a rare case in September where President Trump invoked CFIUS in blocking a $1 billion acquisition of a U.S. semiconductor manufacturer by a Chinese-backed private equity fund.
As I noted in the article, CFIUS is “looking at a lot more deals than they have traditionally, and a lot more politically sensitive deals.” Under the newly proposed legislation, stricter and further reaching reviews may become the norm.
The full article, Targeting China’s Purchases, Congress Proposes Tougher Reviews of Foreign Investments, was published on November 8, 2017, and is available online.
More Acquisitions May Be Blocked in the Future
Last month, asserting national security concerns, President Trump blocked a $1.3 billion acquisition of Oregon-based Lattice Semiconductor by a subsidiary of the Canyon Bridge Fund (Canyon Bridge), a private equity fund backed by Chinese investors. This is one of the few instances to date in which a sale to a non-U.S. buyer of a U.S. company has been blocked under rules administered by the U.S. Committee on Foreign Investment in the United States (CFIUS). Yet the facts of this matter suggest that more potential acquisitions are likely to be blocked in the future.