Benzinga | Dec 13, 2021 05:26PM EST

Magnachip Semi, Wise Road Capital Report Withdrawal Of Committee on Foreign Investment in the United States Filing, Mutually Terminate Merger Deal

Magnachip Semiconductor Corporation ("Magnachip Corp." or the "Company") (NYSE:MX), the U.S. (Delaware) parent of Magnachip Semiconductor, Ltd., and South Dearborn Limited, a company incorporated in the Cayman Islands, and Michigan Merger Sub, Inc., a Delaware corporation, which are investment vehicles established by Wise Road Capital LTD and certain of its limited partners ("Wise Road"), today announced that they received permission from the Committee on Foreign Investment in the United States ("CFIUS") to withdraw their joint CFIUS filing in relation to their proposed transaction (the "Merger") and will be terminating their previously announced definitive merger agreement.



This course of action resulted from the inability of the parties, despite months of effort, to obtain CFIUS's approval for the Merger. In connection with the termination of the merger agreement, South Dearborn will pay the Company a termination fee of $70.2 million, of which $51 million will be paid promptly and $19.2 million will be deferred up to March 31, 2022. In connection with the termination of the merger agreement, the parties will be releasing each other from all obligations with respect to the proposed merger transaction as well as from any claims arising out of or relating to the merger agreement.

The Company also intends to have Magnachip Semiconductor, Ltd., the Korean operating subsidiary of the Company, withdraw its application concerning the Merger that had been submitted to the Korean Ministry of Trade, Industry and Energy under Article 11-2 of the Act on Prevention of Divulgence and Protection of Industrial Technology.

"While we are disappointed by the termination of our merger agreement, we are confident that Magnachip remains well positioned to create value for our shareholders as an independent public company," said YJ Kim, Magnachip's Chief Executive Officer. "This outcome does not impact the sound long term fundamentals of our business and our ability to accelerate our MX 3.0 strategy. In fact, over the past eight months our team has continued to advance our previously announced 2020-2023 plans for sustainable and profitable growth. We will share further details about the plan progress on a call that will be scheduled for January 6th, 2022. I would like to thank our customers for their ongoing trust and Magnachip's employees for their commitment to delivering industry-leading products."

Magnachip's Board of Directors (the "Board") is actively engaged in determining the best way to return and enhance value to shareholders. Accordingly, in order to allow adequate time to evaluate all options, the Board has adopted a limited-duration shareholder rights plan (the "Rights Plan") and declared a distribution of one right ("Right") for each outstanding share of common stock. The Rights Plan is effective immediately and will expire on December 12, 2022, unless earlier redeemed, exchanged or amended. The record date for the Rights distribution is December 23, 2021. The Rights will generally become exercisable only if any person or group acquires 12.5% (or 20% in the case of a passive institutional investor) or more of the Company's outstanding common stock (the "triggering percentage"). If a person or group acquires the Company's outstanding common stock in an amount above the triggering percentage, each Right will entitle its holder (other than the acquirer(s)) to purchase for $80, a number of shares of the Company's common stock having a market value of twice such price. Alternatively, in the event the Rights become exercisable, the Board may elect to exchange one share of the Company's common stock for each outstanding Right (other than Rights owned by the acquirer(s)). In addition, if the Company is acquired in a merger or other business combination transaction after a person or group acquires 12.5% (or 20% in the case of a passive institutional investor) or more of the Company's outstanding common stock, the Rights would entitle the Company's stockholders, other than the acquiror, the opportunity to purchase for each share of common stock owned, $80 worth of shares of the other party's common stock having a market value of twice such price.

The Rights Plan is designed to enable all shareholders to realize the long-term value of their investment in the Company and has been adopted to protect all shareholders from opportunistic efforts to obtain control of the Company, without appropriately compensating the Company's shareholders, following termination of the Merger while the Board evaluates go-forward options for the Company. The Rights Plan was not adopted in response to any specific effort to obtain control of the Company. The plan does not prevent the Board from considering or accepting an offer to acquire the Company, however, if the Board believes that such action is fair, advisable and in the best interest of shareholders of the Company as a whole.

A copy of the Rights Plan and a summary of its terms will be filed on a Form 8-K with the Securities and Exchange Commission.

In addition, in light of the termination of the Merger, the Company will be holding a 2022 Annual Meeting, the details of which will be provided as soon as practicable.