A secretive U.S. government panel has objected to at least nine acquisitions of U.S. companies by foreign buyers so far this year, people familiar with the matter said, a historically high number that bodes poorly for China’s overseas buying spree.
The objections indicate that the Committee on Foreign Investment in the United States (CFIUS), which reviews acquisitions by foreign entities for potential national security risks, is becoming more risk-averse under U.S. President Donald Trump.
Chinese companies and investors eyeing U.S. assets could face more roadblocks as a result, at a time when the Chinese government is also restricting the flow of capital out of China following a bonanza of Chinese overseas deals.
There have been 87 announced acquisitions of U.S. companies by Chinese firms so far in 2017, the highest on record and up from 77 deals in the corresponding period in 2016.
CFIUS’s more conservative stance toward deals coincides with growing political and economic tensions between the United States and China. On Wednesday the two countries failed to agree on major new steps to reduce the U.S. trade deficit with China.
Since the start of the year, CFIUS has sent letters to companies involved in at least nine deals to say they would be blocked based on measures they have proposed to address potential national security risks, the people familiar said.
Many of these deals are in the technology sector, the sources said. A rise in cyber security threats and rapid advances in technology makes it more difficult to establish whether a deal poses any threat, lawyers who represent companies before CFIUS said.
An initial objection by the watchdog does not necessarily kill the deal immediately.
Some companies this year have chosen to keep their CFIUS filings alive by proposing new mitigation measures, while others have pulled their applications and canceled their deals, the people said. They asked not be identified because interactions between CFIUS and the companies are confidential.
“CFIUS decisions are highly sensitive and we are not going to comment on rumors of their outcome,” a White House spokeswoman said.
A spokesman at the Treasury Department declined to comment. Treasury leads CFIUS with Treasury Secretary Steven Mnuchin serving as chairman.
A number of companies have said in regulatory filings that their high-profile deals are before CFIUS.
They include Chinese payments company Ant Financial’s $1.2 billion acquisition of U.S. money transfer company MoneyGram International Inc (MGI.O) and China-backed buyout fund Canyon Bridge Capital Partners LLC’s $1.3 billion acquisition of U.S. chip maker Lattice Semiconductor Corp (LSCC.O).
In addition, investment firm China Oceanwide Holdings Group Co Ltd’s $2.7 billion acquisition of U.S. life insurer Genworth Financial Inc (GNW.N) and China-based semiconductor investment fund Unic Capital Management’s $580 million acquisition of U.S. semiconductor testing equipment company Xcerra Corp (XCRA.O) are also with the watchdog.