GlobalWafers to Reassess Strategy After Siltronic Deal Demise

(Bloomberg) -- Taiwan's GlobalWafers Co. expressed frustration that its planned takeover of Siltronic AG failed to win regulatory approval from the German government, saying it would reassess its future investment strategy.

The $5 billion deal was derailed by the German government, which didn't reach a decision on its review of the transaction after more than a year. The Economy Ministry blamed a late approval from China for not making a decision in time.

“Until the end of this deadline, not all necessary steps of the investment review could be concluded,” the ministry said in an emailed statement. “This applies especially to the review of the approval by the Chinese authorities which only happened last week.”

The failed transaction raises questions over what comes next for the Taiwanese technology company as well as Siltronic. Shares in the German company, which could again become a target, rose as much as 3.9%, valuing it at 3.6 billion euros ($4 billion).

Wacker Chemie AG, Siltronic's largest shareholder, said it still planned to sell its 30.8% stake in medium term. The Economy Ministry said it would renew its review in the event of another offer.

Initially announced in December 2020, the takeover of Munich-based Siltronic was intended to boost GlobalWafers' capabilities in 5G and Internet of Things technologies as well as accelerate its progress toward compound-based semiconductors, the next stage in development beyond silicon.

‘Far-Reaching Proposals'

Both companies acknowledged the deal's failure with the passing of the agreement's Jan. 31 deadline. In GlobalWafers's statement, the company said it had made “extremely far-reaching remedy proposals and commitments” and Germany's approval was the last outstanding condition.

“Based on our efforts to reach a mutually acceptable solution as well as our long and successful history in Europe this outcome is very disappointing,” said Chief Executive Officer Doris Hsu in the statement. “We will analyze the non-decision of the German government and consider its impact on our future investment strategy.”

The business combination agreement includes a clause for GlobalWafers to pay a termination fee of 50 million euros to Siltronic in the event of failure to obtain regulatory approvals within the applicable deadlines, Siltronic said in a statement Tuesday.

GlobalWafers struggled to win over Germany at a time when governments around the world are on alert over the risk of losing key technology. At a closed-door meeting on Friday, CEO Hsu failed to resolve the government's concerns.

Heightened Scrutiny

The meeting marked the firm's final opportunity to convince authorities to back the deal. The company had offered the government special voting rights via a “golden share” as well as ways to undo the purchase or sell back key assets in Siltronic, Bloomberg News reported.

International chip takeovers have faced increasing headwinds as governments have begun to treat semiconductors and supply chains as national-security issues. Authorities were put on heightened alert after a prolonged shortage of microelectronics roiled the auto industry and undermined post-Covid economic recoveries.

Nvidia Corp. is preparing to abandon its purchase of British chip company Arm Ltd. from SoftBank Group Corp. after drawing backlash from regulators and making little to no progress in winning approval for the $40 billion deal. During the process, Nvidia's bid faced a national security review in the U.K. and a lawsuit to block it by the U.S. Federal Trade Commission.

Other deals, however, have managed to win approval. Chinese regulators signed off on Advanced Micro Devices Inc.'s purchase of Xilinx Inc., clearing the way for one of the largest deals in the global semiconductor industry.

In its statement, GlobalWafers said it directly holds 13.67% of Siltronic shares and has no specific restrictions on future trading. GlobalWafers said it would announce alternative plans on Feb. 6.