April 10, 2017 / 9:16 PM / 4 months ago

UPDATE 1-China-backed fund to acquire Xcerra for $580 million

(Adds details about Sino IC's shareholders, closing stock price)

By Liana B. Baker and Koh Gui Qing

NEW YORK, April 10 (Reuters) - A unit of a large semiconductor investment fund linked to the Chinese state has agreed to buy U.S. semiconductor testing company Xcerra Corp for $580 million in cash, the companies said on Monday.

The deal is subject to approval by the Committee on Foreign Investment in the United States (CFIUS), a government panel that reviews acquisitions by foreign entities for potential national security risks. CFIUS has cracked down on technology deals related to the semiconductor industry.

The buyer is Unic Capital Management, a subsidiary of Sino IC Capital that was founded last year, the companies said in a news release. Sino IC Capital was established in August 2014 and has approximately RMB 138.7 billion ($20.9 billion) in funds under management to invest in the semiconductor space.

Unic is paying $10.25 per share in cash for Xcerra. Xcerra shares gained 7 percent to close at $9.63 on Monday. That was still below Unic's offer price, indicating some market skepticism about the deal closing.

The deal is expected to close by year-end.

Chinese suitors have faced intense scrutiny from regulators in their pursuit of U.S. chip makers, resulting in some failed deals in recent years.

According to the website of a Sino IC shareholder, China Development Bank Capital, Beijing-based Sino IC has at least eight shareholders and was created with the support of the “leaders in the general office of the State Council and the relevant ministries.” The State Council refers to the Chinese Cabinet.

The “overall idea” of Sino IC's investment strategy is to focus on the national development of China’s integrated circuit industry and “ease the investment bottleneck” in the sector, the website said.

Of the eight listed shareholders of Sino IC, at least seven are owned by or affiliated with the Chinese state, according to the websites of the companies and Chinese corporate filings. Xcerra declined to comment when asked about Sino IC's shareholders.

Massachusetts-based Xcerra designs and manufactures equipment to test semiconductors and circuit boards. It does not make semiconductors. It is able to seek other buyers for the next 35 days under terms of the merger agreement.

Xcerra was advised by Cowen and Company LLC and Latham & Watkins LLP. Sinoc IC was advised by Grant Thornton International and Wilson Sonsini Goodrich & Rosati.

Sino IC shareholders include China Development Bank Capital, a unit of China Development Bank, a state-owned Chinese development bank; and China Mobile Ltd, China’s state-owned wireless carrier. (Reporting by Liana B. Baker and Koh Gui Qing in New York; Editing by Matthew Lewis)

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