President Donald Trump blocked a Chinese-backed investor frombuying Lattice Semiconductor Corp., casting a cloud over Chinesedeals seeking U.S. security clearance and spurring a call forfairness from Beijing.

It was just the fourth time in a quarter century that a U.S.president has ordered a foreign takeover of an American firmstopped on national security concerns. Trump acted on therecommendation of a multi-agency panel, the White House and theTreasury Department said Wednesday. The spurned buyer, CanyonBridge Capital Partners LLC, is a private-equity firm backed by aChinese state-owned asset manager.

The Trump administration has maintained a tough stance againstChinese takeovers of American businesses even as it seeks China'shelp to resolve the North Korean nuclear crisis. Other deals underreview include MoneyGram International Inc.'s proposed sale to AntFinancial, the financial services company controlled by Chinesebillionaire Jack Ma. The government is also examining anagreement by Chinese conglomerate HNA Group Co. to buy a stake inSkyBridge Capital LLC, the fund-management firm founded by AnthonyScaramucci, who was briefly Trump's White House communicationsdirector.

“Consistent with the administration's commitment to take allactions necessary to ensure the protection of U.S. nationalsecurity, the president issued an order prohibiting theacquisition,” Treasury Secretary Steven Mnuchin said in astatement.

In Beijing, Ministry of Commerce spokesman Gao Feng said a mediabriefing Thursday that China is concerned over the matter and thatthe U.S. should create a fair and transparent businessenvironment.

“Conducting security checks on a sensitive investment is anation's legitimate right, but it shouldn't be used as aprotectionist tool,” Gao said, adding that the acquisition isa corporate decision that the U.S. should evaluateobjectively.

MoneyGram shares fell as much as 4.4% in after-market U.S.trading, while Lattice shares sank as much as 1.7%. Shares ofGenworth Financial Inc., which has a $2.7 billion sale to ChinaOceanwide Holdings Group Co. pending U.S. approval, fell 2.7%.

Canyon Bridge said in a statement it was disappointed with thedecision and would stay focused on other investment opportunities.Lattice said in a statement that the acquisition was beingterminated after the president's order.

“The transaction with Canyon Bridge was in the best interests ofour shareholders, our customers, our employees and the UnitedStates,” Lattice CEO Darin G. Billerbeck said in the statement. “Wewill continue to focus on initiatives that will contribute toLattice's long-term success.”

Billerbeck came to Washington two weeks ago to make a last-ditcheffort to persuade government officials to support the deal.Lattice and Canyon Bridge had proposed measures they said wouldaddress U.S. concerns while allowing the deal to proceed, accordingto that report.

Military Applications

Lattice makes programmable logic chips, which have a widevariety of uses because their attributes can be changed usingsoftware. The chips are used in communications, computing, and inindustrial and military applications. The company generates morethan 70% of its revenue in Asia, according to data compiled byBloomberg.

Trump's move builds on years of U.S. opposition to China'sefforts to bolster its chip industry by buying American technology.China, the world's largest chip market, has been on the hunt foracquisitions in the field as it looks to build a domestic supplyand rely less on imports, as the $300 billion global semiconductorindustry undergoes its biggest wave of consolidation. U.S.officials worry that China's investment push could threatenthe competitiveness of American industry and give Beijing access tocutting-edge technology with commercial and militaryapplications.

The national-security risks posed by the deal included “theChinese government's role in supporting this transaction, theimportance of semiconductor supply chain integrity to the UnitedStates government, and the use of Lattice products by the UnitedStates government,” the White House said.

Uncommon Lengths

Lattice went to uncommon lengths in hopes of saving its $1.3billion sale to Canyon Bridge, first announced in November.Acquisitions of U.S. companies like Lattice by overseas buyers arereviewed by the Committee on Foreign Investment in the U.S., apanel staffed by senior officials from the Treasury, State,Homeland Security and Defense departments. CFIUS can bless deals orrecommend changes to address security concerns. If it doesn't likea deal, it can recommend the president block it.

But the process rarely gets that far. It's more common forcompanies to walk away from a transaction once the secretive panel—which doesn't comment publicly on its work —indicates it won'tapprove it, rather than risk being branded a security threat. Whilea president in theory could overrule the panel's recommendation,the three previous proposals kicked up to the president since 1990have been blocked as the panel advised.

In this instance, Lattice and Canyon Bridge refiled three timeswithout winning approval before making the unusual decision toappeal to Trump in hopes of winning him over with a pledge to savejobs.

First Target

Lattice was Canyon Bridge's first acquisition target. The fund'smandate is to make investments in companies in the semiconductorindustry mainly in the U.S., according to regulatoryfilings. Canyon Bridge is investing on behalf of a Chineseventure capital fund sponsored by China Reform Fund Management, astate-owned asset manager.

The proposed acquisition was at least the third Chinese dealthat collapsed this year after failing to win approval from thesecurity panel. The others are HNA's investment in Global EagleEntertainment Inc., an in-flight entertainment and internetservices provider, and T.C.L. Industries Holdings' proposedpurchase of Inseego Corp.'s mobile-broadband business.

The administration has stepped up pressure on China for monthsover trade and other matters. Trump said in April that CommerceDepartment was investigating whether steel imports from Chinathreaten national security. In August, he directed the U.S. traderepresentative to consider probing China over suspectedintellectual property theft.

Bloomberg News