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From: Glenn Petersen10/18/2017 8:43:19 PM
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SoftBank deals held up before US security regulator

Series of deals delayed before Cfius raise questions about foreign investment approvals

by Arash Massoudi in New York
Financial Times
October 18, 2017

SoftBank’s efforts to become a dominant investor in the US have run into roadblocks in Washington, where national security regulators have yet to clear at least three of the Japanese conglomerate’s deals struck since Donald Trump became president.

The list of SoftBank transactions stuck before the Committee on Foreign Investment in the US (Cfius) include its $3.3bn takeover of alternative investment group Fortress and its acquisition of robotics company Boston Dynamics from Google’s parent company Alphabet, according to several people informed on the matter.

The third transaction — the transfer of a near 25 per cent stake in the UK’s Arm Holdings to the Japanese group’s technology investment fund — has also been held up, although Cfius approved the chip designer’s $32.4bn takeover by SoftBank last year.

The delays in obtaining Cfius approval has raised questions over the company’s ability to close other high-profile US transactions under the Trump administration.

SoftBank is in talks to make a significant investment in ride-hailing group Uber and is also in late-stage discussions about a merger with Sprint, the US mobile operator it controls, Deutsche Telekom’s T-Mobile which is already expected to face significant competition scrutiny. SoftBank declined to comment.

The difficulties also stand in stark contrast to what appeared to be a budding relationship between SoftBank founder and chief executive Masayoshi Son and Mr Trump.

The two men embraced in December in an appearance in Manhattan shortly after Mr Trump’s election victory, when Mr Son pledged to invest $50bn in the US over the next four years. In February, President Trump cited SoftBank before a joint session of Congress as one of the companies that had promised to invest and create new jobs in the US since his election.

Two people told the Financial Times that they did not believe any of the three deals would ultimately be blocked. But they blamed the delays on a lack of focus on quickly vetting foreign investment by the Trump Administration, pointing to a build-up of pending cases before Cfius.

“Foreign investment seems to be grinding to a halt. Chinese deals aside, the Cfius review is taking longer than it has in the past,” said one Washington-based lawyer, who acknowledged that the process had also slowed during the Obama administration.

A spokesman for Treasury, which leads Cfius reviews, said that the agency was prohibited from publicly disclosing information filed with it. He added: “Cfius reviews focus on national security concerns and Treasury takes the role as chair of Cfius very seriously, to ensure that Cfius identifies and addresses any national security concerns posed by such foreign investment.

”One person familiar with the agency’s dealings disputed criticism of the Trump administration, saying that Treasury secretary Steven Mnuchin had been fully engaged in the Cfius process and that the premise that Cfius had not been able to reach timely decisions was not accurate.

Heath Tarbet, a former Allen & Overy lawyer, began serving as an assistant secretary in the Treasury department earlier this month and will oversee Cfius.

Cfius is comprised of senior level officials from across the US government with the power to review all inbound foreign transactions and the ability to mitigate or block any deal that may harm the country’s national security.

In the past, it has acted to prevent Chinese companies from acquiring sensitive US financial information or technology such as semiconductors. It has never blocked any of SoftBank’s previous deals, including the company’s 2013 takeover Sprint or its 2016 purchase of Arm.

SoftBank agreed to acquire Fortress in February and Boston Dynamics in July. The FT revealed its plans to transfer a stake in Arm in March.

Other deals awaiting Cfius clearance include the $5.9bn acquisition of Brocade Communications by Broadcom, the semiconductor company that redomiciled to Singapore from the US. That deal was announced in November 2016.

Ant Financial, an affiliate of China’s Alibaba Group, is also attempting to get clearance for its $1.2bn of US money transfer business MoneyGram, which was agreed in April.
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