In the second setback to a U.S. acquisition by Chinese investors in a week, a Chinese investment group has ended its proposed $3.78 billion investment in Western Digital.
The move, announced Tuesday by Western Digital, complicates but doesn t end the Irvine storage company s proposed $19 billion acquisition of Milpitas flash memory maker SanDisk, which was announced last November. That deal, which now must be approved by shareholders, will close in the second quarter of this year.
The decision by by Unisplendour and Unis Union Information System of China follows on the heels of a decision last week by Fairchild Semiconductor to spurn a higher offer from China Resources Microelectronics and Hua Capital Management of China for one from ON Semiconductor of Phoenix. That move also was prompted by concerns that U.S. approval would be difficult to obtain.
Unisplendour s parent company, Tsinghua Unigroup, is a key part of China s drive to become a major player in the global semiconductor industry, through innovation, investment and acquisitions.
Western Digital, an Irvine computer storage company, said the the decision by Unis Union to end its investment follows a review by the Committee on Foreign Investment in the U.S. CIFIUS is an intergovernmental body that reviews proposed sales of American companies to foreign entities.
CIFIUS had notified that it was investigating the proposed investment under the Exon-Florio Amendment to the Defense Production Act, which triggered a 15-day period during which either Western Digital or Unis Union could terminate the agreement.
Congressional concern over a string of Chinese acquisitions of U.S. tech companies, a number of them based in Silicon Valley, appears to have intensified CIFIUS reviews of similar acquisitions.
The investment would have given the Chinese investors a 15 percent share of the Irvine-based storage firm and a seat on its board, and Western Digital money to use for acquisitions.
Western Digital said that it will move ahead with the SanDisk deal under different arrangements. WD shareholders will receive an alternate merger consideration, the company said. Western Digital believes the combination is compelling and will create significant value for its shareholders, it said.
We continue to look forward to our transformational combination with SanDisk and capitalizing on the growth opportunities ahead of us as the demand for data storage continues to increase, despite the inability to carry out the equity investment by Unis, said Steve Milligan, Western Digital CEO.
A joint venture agreement between Unis Union and Western Digital announced in November remains in place, the Irvine storage company said.
Photo: Western Digital logo (Mercury News archives)
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