DuPont's canceled acquisition fuels fears of China scuttling mergers

Rogers

02/11/2022 20:15

By Anirban Sen
       NEW YORK, Nov 2 (Reuters) - DuPont De Nemours Inc's
 DD.N  decision to scrap its deal to buy Rogers Corp  ROG.N  has
raised concerns that more Western buyers will follow the lead of
the U.S. chemicals company in abandoning acquisitions because
Chinese regulators will not clear them.
    DuPont said on Tuesday it terminated its $5.2 billion
acquisition of Rogers, a U.S. electronic materials maker,
because of protracted delays in securing regulatory approval,
marking the first major U.S. deal in four years to collapse
because Chinese officials dragged their feet on providing
clearance. Qualcomm  QCOM.O  ended its $44 billion purchase of
Dutch peer NXP Semiconductors NV in 2018 after failing to secure
regulatory approval.  urn:newsml:reuters.com:*:nL4N31X4ML
    China's regulators have declined to comment on the DuPont
deal and have not provided a reason for the delay in reviewing
it. But the deal's demise comes amid renewed trade and
geopolitical tensions between Washington and Beijing that has
fueled investor concerns that mergers could become a casualty. 
        One merger arbitrage fund investor, who declined to be
named, said deals involving Chinese approval will be closely
watched in the aftermath of the scrapped DuPont-Rogers deal.  
  
    Shares of some U.S. companies with a significant footprint
in China that are waiting to complete deals dropped on Wednesday
as a result.
    Shares of Tower Semiconductor  TSEM.O , which agreed in
February to sell itself to Intel Corp for $5.4 billion, were
down 4% on Wednesday afternoon at $41.31, a significant discount
to the $53 per share deal price, reflecting doubt among
investors over whether the transaction will be completed.
    Shares of Altra Industrial Motion Corp  AIMC.O , a U.S.
automation equipment maker which agreed last week to sell itself
to Regal Rexnord Corp  RRX.N  for $5 billion, traded down almost
1% to $59.19, their biggest discount to the $62-per-share deal
price since the transaction was announced.
    Shares of U.S. chip maker Silicon Motion Technology Corp
 SIMOy.F , which will require Chinese regulatory approval to
complete its $3.8 billion sale to peer MaxLinear Inc, have
dropped 40% since their transaction was announced in May.
    Some investors cautioned, however, that the collapse of
these deals hinges not just on whether Chinese regulators will
withhold clearance but also on whether the acquirers are
committed to the transactions. 
    In the case of Rogers, DuPont was happy to walk away rather
than give the Chinese regulators more time because this year's
market downturn had made the acquisition seem pricey compared to
when it inked the deal 12 months ago, experts said. 
    "Investors felt that DuPont was paying too much for Rogers
and there were expectations of a price cut," said Chris Pultz,
portfolio manager for merger arbitrage at Kellner Capital.
 (Editing by Deepa Babington)
 ((Anirban.Sen@thomsonreuters.com; Twitter: @asenjourno; Reuters
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