Conflicting Interests of South Korea, the U.S. and China
The sale of MagnaChip to Chinese private equity firm Wise Road Capital is unlikely to be wrapped up in the near future due to the conflicting interests of South Korea, the United States and China.
The company recently announced that the sale does not require any approval from the Committee on Foreign Investment in the United States (CFIUS) and the Ministry of Trade, Industry and Energy of South Korea. The company’s assets are located in South Korea, its capital is located in the United States, and this structure has resulted in various interpretations and controversies regarding the issue of whether the government approvals are really required.
MagnaChip’s stance is that it is listed in the United States without manufacturing facilities and intellectual properties in the United States and, as such, the approval from the CFIUS is not required and that the sale will entail no asset transfer out of South Korea and, as such, the approval from the ministry is not required. “The sale is about a Chinese private equity firm replacing a U.S. private equity firm as the largest shareholder in a U.S.-listed company and what matters here is a final approval from the U.S. Securities and Exchange Commission,” the company explained.
Nonetheless, experts point out that the sale will be practically impossible without the approvals from the ministry and the CFIUS. “The SEC cannot but be affected by the decision of the CFIUS and the South Korean government may designate the technology of the company as one to be protected nationally,” one of them said, adding, “In that case, the sale cannot be done without an approval from the South Korean government.”