March 23, 2011

Third Recent Chinese Transaction Scuttled by National Security Review

Here’s news culled from this Davis Polk memo: In mid-February, the U.S. committee charged with examining national security implications of foreign acquisitions of U.S. businesses determined that Huawei Technologies should be required to unwind its recent purchase of certain assets of 3Leaf Systems, a California-based company which provides technology for cloud computing. According to news reports, after conducting a 30-day review and a follow-on 45-day investigation of the acquisition pursuant to the “Exon-Florio” statute, the interagency Committee on Foreign Investment in the United States informed Huawei that it would have to divest the assets or CFIUS would recommend to the U.S. President that the acquisition be unwound. Huawei reportedly decided initially to wait for the President’s decision, required by law to be made within 15 days, but subsequently agreed to divest the assets. Huawei’s decision spared President Obama what might have been a controversial and difficult determination.