China’s Smartphone Contract Maker Wingtech To Acquire Dutch Chip Maker Nexperia For $3.63B

China’s smartphone contract manufacturer Wingtech Technology is acquiring Dutch chip maker Nexperia by purchasing a majority stake from its Chinese owners for RMB25.2 billion (US$3.63 billion), a mega-deal that requires approval from the U.S. authorities.

The acquisition will enable Wingtech to indirectly own 75.86% of Nexperia, said Wingtech in a stock exchange filing late Wednesday.

The deal, however, might drive into rough terrain amid the ongoing sino-U.S. trade war as China’s acquisition of American technology companies has faced more hurdles as U.S. President Donald Trump took a hard stance on such transactions.

Large deals of this kind are subject to regulatory approval including from the Committee on Foreign Investment in the United States (CFIUS), an inter-agency committee that reviews the national security implications of foreign investments in American companies or operations.

The deal, if successfully completed, will value Nexperia at RMB35.1 billion (US$5.06 billion), about 1.5 times the US$2.1 billion that a consortium of Chinese investors paid to purchase it from NXP Semiconductors in 2016, according to Wingtech’s regulatory filing.

Wingtech, which claims to be the world’s largest smartphone original design manufacturer (ODM) with over 10% global market share, plans to raise up to RMB4.63 billion (US$666 million) in a private placement to finance the deal. The amount is still far from enough compared to its intended price tag.

Founded in 2006 by Zhang Xuezheng, a former engineer-turned-executive for China’s telecom equipment ZTE Corporation, Wingtech primarily produces smartphones on behalf of a range of brands including Huawei and Xiaomi.

The company also involves in the research and production of mobile terminals, intelligent hardware and vehicle networking, according to the company’s website.

The company said that it plans to march into the automotive electronics sector after the deal is completed, as it seeks to benefit from the growing business demand in the 5G era. Wingtech is also seeking to build up its chip capabilities in chip design, manufacturing and packaging.

Wingtech’s shares have been suspended since April. It recorded about RMB16.8 billion (US$2.41 billion) in revenues in 2017.

Nexperia is a component supplier in the chip sector, counting Apple Inc. and Samsung Electronics among its clients. The Netherlands-based Nexperia was formerly a products unit of NXP Semiconductors.

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