Micron Technology has told China’s Tsinghua Unigroup Ltd that its $23 billion acquisition offer is not possible, because U.S. officials would not allow the deal due to national security concerns. Micron is the last major U.S. based manufacturer of DRAM chips used in PC’s.

Why deal between Micron and Tsinghua is not possible?

According to Micron, an acquisition by Tsinghua Unigroup would not be approved by the United States inter-agency task force called the CFIUS because it has the power to stop mergers that might risk the national security. According to the sources, last week Tsinghua Unigroup had conveyed its interest to Micron about an acquisition but it didn’t present any official offer. It would be a major step for China’s Tsinghua if they acquire Micron.

Stewart Baker, a CFIUS expert with Steptoe & Johnson LLP, said “The deal would come under fierce regulatory scrutiny. It would be very challenging. I won’t say it’s impossible.”

CFIUS will have three options when they will review the deal:
1. It can stop it.
2. It can approve it.
3. It can approve it on condition that the companies sell a particular division or divisions or take other steps to alleviate any harm that the deal might do.

According to the sources, last Monday Tsinghua was arranging to bid $21 per share for Micron, however, Micron shares were trading at $19.16 on Monday afternoon. Unigroup transformed into a major semiconductor player after it acquired Chinese chipmakers Spreadtrum and RDA Microelectronics in deals totalling $1.6 billion last year. The company is managed by Tsinghua University in Beijing and is backed by the central government of China.

News Source : Reuters