On July 11, the Trump administration issued an order blocking and requiring the unwinding of a 2020 acquisition by which Jupiter Systems, LLC (Jupiter), a U.S.-based audiovisual equipment supplier, was acquired by Suirui International Co., Limited (Suirui), a Chinese-based cloud communication service carrier. The administration cited national security concerns due to "the potential compromise of Jupiter's products used in military and critical infrastructure environments."
Details of the matter are still becoming clear, but it appears that the Committee on Foreign Investment in the United States (CFIUS) – as authorized – conducted a post-facto review of the transaction and recommended that the president prohibit the transaction. By order dated July 8, the president did so.
Order Provides Specific Requirements for Divestment, Compliance During Pendency of Divestment
The detailed order requires Suirui to sell all of its Jupiter assets, with limited exceptions, within 120 days, unless an extension is granted. In particular, the order requires the following:
- CFIUS will have 30 days to review and approve the party or parties to which Suirui proposes to sell the Jupiter assets.
- During the 120-day period, the parties must certify on a weekly basis that they are complying with the terms of the order.
- CFIUS may audit the parties' compliance with the order, including through review of the parties' books and records and conducting interviews of the parties' personnel.
The parties must ensure that Suirui personnel refrain from accessing any of Jupiter's non-public technical data and implement measures to protect against such access.
This action aligns with the administration's strategy of mitigating perceived threats from China to critical U.S. assets and infrastructure, reinforcing its commitment to safeguarding national security. But it also serves as a cautionary tale for parties considering a transaction that may implicate U.S. national security, and the potential risk that a transaction may be forced to be unwound even several years after it was closed.
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