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U.S. Regulatory Concerns Undo Philips Lumiled Sale to China?

17 November 2015

The Committee on Foreign Investment in the U.S. (CFIUS) is so far preventing the sale of Philips’ Lumiled lighting components and automotive lighting to a Chinese investment group, Go Scale Capital. The Committee, tasked with the review of international transactions based on national security has, according to Philips, expressed “certain unforeseen concerns” regarding the planned disposal of an 80% stake in Philips’s Lumileds business. Philips stated recently, that the Lumileds deal, which was initiated in March 2015 and valued at approximately $3.3 billion, was uncertain, but would not comment further.

The proposed sale to the Chinese investment firm is the initial step in a two-part plan by Philips to exit the lighting business. The company is moving its focus to medical and consumer-lifestyle products. The remaining lighting activities at Philips are being prepared for a possible IPO.

Will U.S. intervention become the norm? CFIUS is not only standing between Philips and the sale of its lighting business, but continues to delay the acquisition of chip maker integrated silicon solution by a different Chinese investor consortium. Another example is Tsinghua Unigroup’s attempted purchase of Micron Technology for $23 billion, which was reported to fall through at least in part based on the unlikely success of gaining U.S. regulatory approval. CFIUS also delayed Korea’s Seoul Semiconductor’s UV LED affiliate Seoul Viosys acquisition of U.S. UV LED company SETi for three years.

Another example outside of the electronics segment is a fight over the purchase of four Oregon wind farms by Chinese-owned Ralls Corp. U.S. District judge ordered CFIUS to give Ralls access to evidence that President Obama relied on to issue an order preventing the deal, so that Ralls has a chance to contest the decision and challenge assertions of executive privilege. The D.C. Circuit concluded that the presidential order deprived Ralls of constitutionally protected property interests without due process of law. Ralls asserts that CFIUS and Obama have refused to specify what national security concerns led to their decisions. The fight is ongoing.

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