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MagnaChip: U.S. blocks Wise Road Capital acquisition

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MagnaChip Semiconductor, a New York Stock Exchange-listed maker of system semiconductors, is to be acquired by Chinese private equity firm Wise Road Capital but the deal has been put on hold by the U.S. government.

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The Wall Street Journal reported on the 30th (local time) that the U.S. government has put the brakes on the proposed acquisition of MagnaChip Semiconductor, a New York Stock Exchange-listed system semiconductor manufacturer, by Chinese private equity firm Wise Road Capital.

Media reports indicate that the U.S. Treasury Department warned that the purchase of MagnaChip by Wise Road, a Chinese private equity firm, might pose a “national security risk.”. Treasury Department wrote to MagnaChip that Foreign Investment Review Commission (FIRC) had confirmed this risk.

Chinese companies are viewed as once again being blocked from investing in foreign high-tech companies following the Biden administration’s actions.

In March, Wise Road agreed to acquire MagnaChip for $1.4 billion. Subsequently, South Korean and American regulatory authorities examined the purchase proposal.

MagnaChip is a designer and manufacturer of analog and mixed-signal semiconductor platform solutions for communications, IoT, consumer, industrial and automotive applications. The Company provides a broad range of standard products to customers worldwide. It was launched in 2004 after Hynix transferred the non-memory division of Hynix to Citi Venture Capital of the U.S. due to sluggish business.

MagnaChip is based in Korea and manufactures display driver integrated circuits (DDICs) and automotive power management integrated circuits.

The company posted revenues of $113.88 million for the quarter ended June 2021, missing the consensus estimate by 13.14%. Revenues last year were $118.83 million.

According to recently released numbers and future earnings expectations, the sustainability of the stock’s price movement will mostly depend on management’s comments during the earnings call.

Compared to the S&P 500, Magnachip shares have gained 53.3% since the beginning of the year.

The company said it plans to take further action, saying it can provide more relevant information for foreign investment discussions with Wise Road.

For MetaNews.

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