Magnachip's $1.4 billion deal to sell itself to Chinese private equity firm Wise Road was canceled after the deal failed to receive U.S. national security certification.
Magnachip is a company that develops and manufactures analog and mixed-signal semiconductor platform solutions for communications, Internet of Things, consumer, industrial, and automotive applications.
Magnachip's stock was trading at $16.81 in extended trading, down 2%.
Wise Road Capital is a private equity firm based in the United States that invests in premier technology firms. Through close collaboration with companies, the firm focuses on discovering opportunities in enabling technology for global urbanization and smart and green life across several primary themes.
The acquisition posed "risks to national security," according to the U.S. Treasury Department, and the Committee on Foreign Investment in the U.S. had ordered its suspension in June.
The agreement, which was announced in late March, was called off after Magnachip revealed in late May that its planned sale to Wise Road would be subject to a formal CFIUS review.
CFIUS has found national security risks with the sale to Wise Road, Magnachip announced in August, and the deal could be sent to U.S. President Biden for his final decision.
"This line of action resulted from the parties' inability to acquire CFIUS approval for the combination, after months of effort," Magnachip and Wise Road stated on Monday.
Magnachip will receive a $70.2 million termination fee, of which $51 million will be paid immediately and $19.2 million will be deferred until March 31, 2022, in relation to the deal's end.
The two firms shall release each other from any responsibilities connected to the proposed merger transaction, as well as any claims arising out of or relating to the merger agreement, as part of the termination of the consolidation deal.
"While we are disappointed by the cancellation of our merger agreement, we are optimistic that as an independent public business, Magnachip will continue to create value for our shareholders," YJ Kim, Magnachip's Chief Executive Officer, said.
"This result has no bearing on our business's excellent long-term fundamentals or our ability to accelerate our MX 3.0 strategy," Kim added.
The company will also withdraw its application to the Korean Ministry of Trade, Industry, and Energy regarding the transaction.
The semiconductor company also announced that it has implemented a limited-duration shareholder rights plan "to enable sufficient time to assess all possibilities."
