MagnaChip Semiconductor, a chip manufacturer, announced on December 13 that it has terminated a merger agreement worth $1.4 billion with private equity firm Zhi Lu Capital.
Previously, MagnaChip Semiconductor's U.S. headquarters had signed a share sale contract with Zhi Lu Capital, which involved Zhi Lu Capital and its limited partners establishing Southe Dearborn Limited and a Delaware subsidiary in Michigan to purchase shares. However, despite the efforts of both parties over several months, they were unable to obtain approval from the U.S. Committee on Foreign Investment (CFIUS), and thus had to terminate the agreement.
The announcement stated that South Dearborn will pay a termination fee of $70.2 million, with $51 million to be paid immediately and $1.2 million to be paid by March 31, 2022. Regarding the termination of the merger agreement, both parties will mutually release all obligations related to the proposed merger transaction and any claims arising from or related to the merger agreement.
In response, MagnaChip Semiconductor's CEO, YJ Kim, stated in the announcement: "While we are disappointed by the termination of the merger agreement, we still believe in MagnaChip's strategic position to create value for our shareholders as an independent public company. The result of terminating the merger agreement will not affect our excellent and long-term business operations, nor will it impact our plan to accelerate the implementation of the MX 3.0 strategy. In fact, over the past eight months, our team has continued to advance our previously announced sustainable and profitable growth plan for 2020-2023."