National Security And Investment Act 2021: A Case Update

The acquisition of a semiconductor plant, Newport Wafer Fab (now Nexperia Newport Limited) (‘NNL’), by Chinese-owned Nexperia BV (‘Nexperia’) had been under scrutiny since the sale was reported in July 2021.

Please see our previous article here: National Security And Investment Act 2021: A Case Example?.

Following pressure from the UK’s Foreign Affairs Committee, and the National Security and Investment Act 2021 (‘NSIA’) regime entering into full force on 4 January 2022, the transaction was called-in under the regime on 25 May 2022.

The Department for Business, Energy and Industrial Strategy (‘BEIS’), now the Department for Business and Trade, published its final order on 16 November 2022.

The acquisition
In March 2022, following a request by Boris Johnson for the Government’s national security adviser to review the acquisition, it concluded that there were insufficient concerns to block the acquisition on security grounds. The decision faced an onslaught of criticism, not least from the Foreign Affairs Committee, which resulted in BEIS calling-in the acquisition for a full review under the NSIA in May 2022.

Although the acquisition took place in July 2021 (before the NSIA came into force on 4 January 2022), the Government exercised its retrospective powers under the NSIA to review qualifying transactions that completed after 12 November 2020 on grounds of national security.

The final order
The Secretary of State’s decision in the final order requires Nexperia to sell at least 86% of its shareholding in NNL (being the shareholding the company acquired in July 2021) “within a specified period and by following a specified process” (such period and process remains to be seen). This sale would return Nexperia to its original 14% shareholding held before the acquisition took place and also being below the trigger point for the NSIA regime.

The final order states that the acquisition is considered a national security risk on the basis that:

a) UK capabilities could be undermined by the technology and know-how resulting from a potential reintroduction of compound semiconductor activities at the Newport site; and
b) The site location could facilitate access to technological expertise and know-how in the South Wales area, the links between which could prevent the area from engaging in future projects relevant to national security.

Nexperia expressed they will appeal the decision.

Takeaways
The publication of the final order demonstrates the Government’s ability to block, and even reverse, deals retrospectively and otherwise where it is considered the transaction poses a risk to national security. It will be interesting to see how the sale process ordered by the Government is carried out and whether they will use such powers again in the near future.

If you have any queries on the NSIA or on this article, please do not hesitate to contact a member of the Corporate team.