Cree (CREE) announced on February 16 that it will discontinue the Wolfspeed Power and RF Division ("Wolfspeed") sale, which includes silicon carbide (FSE: IFX / OTCQX: IFNNY) power supply, substrate business for RF and gemstone applications. Cree and Infineon were unable to determine alternatives to national security issues of concern to the US Foreign Investment Committee (CFIUS) and therefore the proposed transaction would be terminated.
Cree Chairman and CEO Chuck Swoboda said: "We are disappointed that the sale of Wolfspeed to Infineon could not be completed. "In view of this development, we will shift our focus to the growing Wolfspeed business. This year, the Wolfspeed business performed well as our customers further recognized the value of our unique technology and took a great path as part of Cree. The strength of our balance sheet and improved operating cash flow have enabled us to invest in Wolfspeed while continuing to pursue our LED and lighting growth plans. We believe that investing in all three businesses will create the greatest value for shareholders.
Chuck Swoboda added: â€œI am very grateful to Dr. Ploss and the other members of the Infineon team for their time and commitment to successfully complete the transaction.â€
Although Cree and Infineon did not explain why the US government has reservations about the deal. CFIUS also did not indicate any mitigation practices for the portion of this transaction that is specific to a country's security risk. However, it has been reported that Wolfspeed produces a device that uses military-purpose gallium nitride (GaN). Brian Chilton, a law attorney at DLA Piper LLP, pointed out that this incident shows that the US government will protect the technology that the defense industry attaches to, and the United States does not want to lose its advantage. Therefore, regardless of whether the acquirer is a German manufacturer or a Chinese manufacturer, it will be rejected.
The termination of this transaction with Infineon will trigger a termination fee of $12.5 million to Cree. Due to the termination of the transaction and Cree's decision to focus on running the Wolfspeed business, Wolfspeed will now be reported as a separate part of Cree's ongoing operations.
In July last year, Infineon Technologies and Cree announced that they had signed a definitive agreement. Infineon will acquire Cree's Wolfspeed Power and Radio Frequency (RF) division, which has a total cash payment transaction of approximately US$850 million.
Wolfspeed, based in Research Triangle Park, North Carolina, USA, has been a member of Cree for nearly 30 years and is a leading supplier of SiC power and GaN-on-SiC RF power solutions, with core capabilities including SiC wafers. SiC single crystal gallium nitride layer for substrate fabrication and RF power applications. Infineon CEO Reinhard Ploss has said that the silicon carbide chips produced by Wolfspeed will gradually replace traditional chips in the next few years, especially in the electric and hybrid vehicles market.
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