EXHIBIT C
Business Description of the Acquiring Person:
Halcyon Semiconductor Aktiengesellschaft
Joint Voluntary Notice Filed Pursuant to 31 C.F.R. § 800.501
CFIUS Case No.: CFIUS-023-07-3841
Filing Date: July 14, 2023
Prepared by: Calderwood & Harkness LLP Counsel to Halcyon Semiconductor AG
CONFIDENTIAL — CONTAINS BUSINESS PROPRIETARY INFORMATION
This document has been submitted to the Committee on Foreign Investment in the United States ("CFIUS") in connection with a joint voluntary notice filed pursuant to Section 721 of the Defense Production Act of 1950, as amended (50 U.S.C. § 4565), and the regulations at 31 C.F.R. Part 800. This document contains confidential business proprietary information of Halcyon Semiconductor Aktiengesellschaft and its subsidiaries. Disclosure of this document or its contents, in whole or in part, to any person not authorized to receive it is prohibited. Unauthorized disclosure may result in penalties under applicable law.
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I. INTRODUCTION AND OVERVIEW OF HALCYON SEMICONDUCTOR AG
Halcyon Semiconductor Aktiengesellschaft ("HSAG" or "Halcyon") respectfully submits this Exhibit C as part of the joint voluntary notice (the "Notice") filed with the Committee on Foreign Investment in the United States ("CFIUS") pursuant to 31 C.F.R. § 800.501, in connection with HSAG's proposed acquisition of all of the outstanding equity interests of Marlowe Asset Management Photonics Inc. ("VPI"), a Delaware corporation (the "Transaction"). This Exhibit C provides a comprehensive business description of HSAG as the acquiring person in the Transaction.
Legal Identity and Formation. HSAG is an Aktiengesellschaft (public stock corporation) organized and existing under the laws of the Federal Republic of Germany. HSAG is registered with the Amtsgericht Dresden (Dresden Local Court, Commercial Register) under registration number HRB 28416. HSAG's Legal Entity Identifier (LEI), as assigned under the global LEI system, is 5299007KXQ2M4GHILZ38.
Headquarters. HSAG's principal executive offices and corporate headquarters are located at Industriestraße 44, 01099 Dresden, Saxony, Federal Republic of Germany. The Dresden campus also serves as the site of HSAG's primary wafer fabrication facility and principal research and development center.
Founding and History. HSAG was founded in 2005 as a spin-off of the semiconductor division of Sächsische Elektronikwerke GmbH, a regional electronics manufacturer that had operated in Dresden since German reunification. Under the leadership of Dr. Maximilian Ehrhardt, who joined the company at its founding and has served as Vorstandsvorsitzender (Chief Executive Officer) since 2011, HSAG has grown from a regional power semiconductor design house into a global semiconductor enterprise with operations across Europe, Asia-Pacific, and the Americas. Dr. Ehrhardt's eighteen-year tenure at HSAG has been characterized by a disciplined strategy of organic growth supplemented by selective, technology-driven acquisitions.
Public Company Status. HSAG has been publicly traded on the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) since 2009. Its ordinary shares trade under the ticker symbol HLC on the XETRA electronic trading platform (XETRA: HLC) and are included in the MDAX index of mid-capitalization German equities. As of June 1, 2023, HSAG's market capitalization was approximately €14.8 billion, based on a closing share price of €148.22 and approximately 99.85 million shares outstanding.
Business Overview. HSAG is a global semiconductor company specializing in the design, development, manufacture, and sale of power semiconductors, analog and mixed-signal integrated circuits ("ICs"), and advanced sensor technologies. HSAG's products serve the automotive, industrial automation, communications infrastructure, and consumer electronics sectors. HSAG operates both fabricated ("fab") and fabless semiconductor design models, with its primary wafer fabrication facility located at its Dresden headquarters and additional design centers located throughout Europe, Asia-Pacific, and the United States.
Absence of Government Ownership or Control. As discussed in detail in Section V and Section VII below, HSAG is not owned, controlled, or influenced by any government entity. No government of any country, including the Federal Republic of Germany and any German state (Land), holds any direct or indirect equity interest in HSAG. No sovereign wealth fund holds a material equity position in HSAG. HSAG has no ownership, governance, or contractual relationships with any non-allied foreign government or any government classified as a country of special concern under CFIUS regulations.
II. BUSINESS OPERATIONS AND PRODUCT LINES
A. Overview of Global Business
HSAG is a diversified semiconductor company with a global operational footprint. For the fiscal year ended December 31, 2022 ("FY2022"), HSAG reported consolidated revenue of €6.12 billion and earnings before interest, taxes, depreciation, and amortization ("EBITDA") of €1.37 billion, reflecting an EBITDA margin of approximately 22.4%. These results represent HSAG's trailing twelve-month financial performance and are derived from HSAG's audited consolidated financial statements prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.
As of December 31, 2022, HSAG employed approximately 24,600 individuals worldwide, including approximately 320 employees based in the United States at HSAG's Austin, Texas design center (operated through Halcyon US Inc., as described in Section III below). HSAG's global workforce includes approximately 7,800 engineers and scientists engaged in research, development, and design activities across the company's product lines.
HSAG's business operations span the full semiconductor value chain, including integrated circuit design and development, wafer fabrication, packaging and testing (partially outsourced to contracted OSAT providers), and global sales and distribution. HSAG operates its own wafer fabrication facility in Dresden, Germany, supplemented by foundry relationships with third-party fabrication partners for select product lines. HSAG's design capabilities are distributed across multiple design centers in Germany, Austria, the United Kingdom, Japan, South Korea, Singapore, and the United States.
B. Principal Product Lines
HSAG's product portfolio is organized into three principal business segments, each of which serves multiple end-market applications:
1. Power Semiconductors. HSAG's Power Semiconductor division is the company's largest business segment, accounting for approximately 48% of FY2022 consolidated revenue. This division designs and manufactures power semiconductor devices based on silicon ("Si") and silicon-carbide ("SiC") substrates, including insulated-gate bipolar transistors ("IGBTs"), metal-oxide-semiconductor field-effect transistors ("MOSFETs"), power diodes, and SiC-based Schottky diodes and MOSFETs. These devices are used in automotive powertrains (including electric vehicle inverters and onboard chargers), industrial motor drives, renewable energy inverters (solar and wind), uninterruptible power supplies, and power conversion equipment for telecommunications infrastructure. HSAG's SiC product line, launched in 2017, has experienced rapid growth driven by the global transition to electric vehicles and the increasing adoption of wide-bandgap semiconductor materials in power electronics.
2. Analog and Mixed-Signal Integrated Circuits. HSAG's Analog/Mixed-Signal division accounted for approximately 33% of FY2022 consolidated revenue. This division designs and sells a broad portfolio of analog and mixed-signal ICs, including operational amplifiers, data converters (analog-to-digital and digital-to-analog), voltage regulators, power management ICs ("PMICs"), interface ICs, and signal conditioning circuits. These products serve applications across the automotive, industrial, communications, and consumer electronics markets. HSAG's analog and mixed-signal design activities are distributed across its Dresden headquarters, its design center in Munich, and its U.S. design center in Austin, Texas (operated through Halcyon US Inc.).
3. Sensor Technologies. HSAG's Sensor division accounted for approximately 19% of FY2022 consolidated revenue. This division designs and manufactures micro-electromechanical systems ("MEMS") sensors, magnetic sensors (based on Hall-effect and magnetoresistive technologies), and optical sensors for automotive, industrial, and consumer applications. Key product families include MEMS inertial measurement units for vehicle stability control and advanced driver-assistance systems ("ADAS"), magnetic position sensors for automotive steering and motor control, and ambient light and proximity sensors for consumer electronics devices.
Note Regarding GaN Semiconductors. HSAG's current product portfolio does not include gallium-nitride ("GaN") power amplifiers, GaN-on-SiC high-electron-mobility transistors ("HEMTs"), or any defense-grade semiconductor components. HSAG does not currently design, manufacture, or sell any products based on GaN compound semiconductor technology. The proposed acquisition of VPI is intended to extend HSAG's capabilities into the GaN compound semiconductor segment, which HSAG views as a strategically complementary technology to its existing silicon-carbide power semiconductor business. The strategic rationale for the Transaction is described in further detail in the body of the Notice.
C. Principal Markets and Customers
HSAG's products serve four principal end markets:
Automotive. The automotive sector is HSAG's largest revenue segment, accounting for approximately 42% of FY2022 consolidated revenue. HSAG supplies power semiconductors, analog ICs, and sensor products to major automotive original equipment manufacturers ("OEMs") and Tier-1 automotive suppliers worldwide. Key automotive applications include electric vehicle powertrain systems, battery management systems, ADAS platforms, body electronics, infotainment systems, and lighting. HSAG's automotive customers include leading global OEMs and Tier-1 suppliers, all of which are commercial enterprises with no material classified or defense-related content in their supply relationships with HSAG.
Industrial Automation and Power Systems. The industrial segment accounted for approximately 28% of FY2022 consolidated revenue. HSAG supplies power semiconductors and analog ICs for industrial motor drives, factory automation systems, robotics, renewable energy inverters, smart grid infrastructure, and building automation.
Communications Infrastructure. The communications segment accounted for approximately 18% of FY2022 consolidated revenue. HSAG supplies analog ICs, power management components, and sensor products for 5G wireless base stations, small cells, wireline networking equipment, and data center power systems. HSAG's communications infrastructure products are commercial-grade components sold to equipment OEMs and do not include any defense-grade or classified communications components.
Consumer Electronics. The consumer electronics segment accounted for approximately 12% of FY2022 consolidated revenue. HSAG supplies power management ICs, sensor products, and analog components for smartphones, tablets, wearable devices, and other consumer products.
Customer Base. HSAG's customer base consists of global OEMs and Tier-1 suppliers across the automotive, industrial, communications, and consumer electronics sectors. HSAG does not maintain any material customer relationships with defense ministries, military organizations, or intelligence agencies of any country. To the extent that HSAG's commercial-grade products may be incorporated by HSAG's customers into systems that are ultimately supplied to government end-users, such incorporation occurs downstream of HSAG in the supply chain and is not directed or controlled by HSAG.
Geographic Revenue Breakdown. HSAG's FY2022 revenue was distributed geographically as follows (based on the location of the customer's shipping destination):
D. Manufacturing and R&D Facilities
HSAG's manufacturing and research and development operations are distributed across multiple locations worldwide. The following is a summary of HSAG's principal facilities:
European Facilities:
• Dresden, Saxony, Germany (Headquarters). HSAG's primary wafer fabrication facility and corporate headquarters. The Dresden fab operates 200mm and 300mm wafer lines for silicon power semiconductors and has been upgraded in recent years to support silicon-carbide device fabrication. The Dresden campus also houses HSAG's central research laboratory and the corporate R&D organization.
• Munich, Bavaria, Germany. HSAG operates a design center in Munich focused on analog and mixed-signal IC design for automotive and industrial applications. Approximately 540 engineers are based at this facility.
• Villach, Carinthia, Austria. HSAG operates a power semiconductor design and application engineering center in Villach, employing approximately 380 engineers and technical staff.
• Bristol, United Kingdom. HSAG operates a sensor technology design center in Bristol, focused on MEMS and optical sensor development. Approximately 210 engineers are employed at this location.
• Grenoble, France. HSAG maintains a small design team in Grenoble, France, focused on advanced SiC materials research in collaboration with French academic institutions. Approximately 45 researchers and engineers are based at this location.
Asia-Pacific Facilities:
• Tokyo, Japan. HSAG operates a sales and application engineering office in Tokyo serving Japanese automotive and industrial customers. Approximately 85 employees are based at this location.
• Seoul, South Korea. HSAG operates a design center and sales office in Seoul focused on power management IC design for consumer electronics and communications customers. Approximately 120 employees are based at this location.
• Singapore. HSAG maintains a regional sales and distribution hub in Singapore serving the broader Southeast Asian market. Approximately 65 employees are based at this location.
• Shanghai, People's Republic of China. HSAG operates a subsidiary, Halcyon Semiconductor (Shanghai) Co., Ltd., which performs sales, marketing, and application engineering functions for consumer-grade power management ICs in the Chinese market. This subsidiary is discussed in further detail below and in Section VI.B. FY2022 revenue attributable to the Shanghai subsidiary was $81.4 million (approximately €77.3 million at average exchange rates), representing approximately 1.3% of HSAG's total consolidated revenue. The Shanghai operation does not conduct any research, development, or manufacturing activities. No GaN, defense-related, or dual-use semiconductor activities of any kind are conducted in China.
U.S. Facilities:
• Austin, Texas, United States. HSAG operates a fabless semiconductor design center in Austin, Texas, through its wholly owned subsidiary Halcyon US Inc. This facility is described in detail in Section III.A below.
III. U.S. PRESENCE AND OPERATIONS
A. Existing U.S. Subsidiary — Halcyon US Inc.
Legal Identity. Halcyon US Inc. is a corporation organized under the laws of the State of Delaware. Halcyon US Inc. is a wholly owned subsidiary of Halcyon Semiconductor AG. Its U.S. Employer Identification Number (EIN) is 81-3056429.
Principal Office. Halcyon US Inc.'s principal office is located at 11501 Alterra Parkway, Suite 300, Austin, Texas 78758.
Business Function. Halcyon US Inc. operates as a fabless semiconductor design center focused on analog and mixed-signal integrated circuit design for commercial (non-defense) applications. The Austin design center supports HSAG's global Analog/Mixed-Signal division by designing power management ICs, data converters, and signal conditioning circuits for automotive, industrial, and communications customers. All products designed at the Austin facility are commercial-grade semiconductors intended for civilian end-use applications.
Employees. As of the date of this filing, Halcyon US Inc. employs approximately 320 individuals, all of whom are based in the United States at the Austin facility. The Austin workforce consists primarily of analog and mixed-signal IC design engineers, applications engineers, product managers, and support staff. No employee of Halcyon US Inc. currently holds a U.S. government personnel security clearance at any level (Confidential, Secret, or Top Secret).
Government Contracts and Security Clearances. Halcyon US Inc. does not hold a Facility Security Clearance ("FCL") under the National Industrial Security Program ("NISP"). No classified work of any kind is performed at the Austin facility. Halcyon US Inc. does not hold any active contracts with the U.S. Department of Defense ("DoD"), any other U.S. government agency, or any prime contractor under which classified or controlled information is accessed or generated. Halcyon US Inc. is not listed on any active DoD contract award or subcontract requiring access to classified information.
Export Controls. Halcyon US Inc. is not registered with the Directorate of Defense Trade Controls ("DDTC") under the International Traffic in Arms Regulations ("ITAR") and does not design, manufacture, or export any defense articles or defense services subject to ITAR jurisdiction. Halcyon US Inc.'s commercial semiconductor products are subject to the Export Administration Regulations ("EAR") administered by the Bureau of Industry and Security ("BIS"), and are generally classified under Export Control Classification Numbers ("ECCNs") that do not require a license for export to the vast majority of destinations. Halcyon US Inc. maintains compliance with all applicable EAR requirements and has not been the subject of any enforcement action by BIS.
B. Acquisition Vehicle — Halcyon US Holdings Inc.
Legal Identity. Halcyon US Holdings Inc. is a corporation organized under the laws of the State of Delaware. Halcyon US Holdings Inc. was incorporated on June 5, 2023, and its U.S. Employer Identification Number (EIN) is 93-2841067. Its registered agent is National Registered Agents of Delaware, 160 Greentree Drive, Suite 101, Dover, Delaware 19904.
Purpose. Halcyon US Holdings Inc. was formed solely for the purpose of consummating the acquisition of VPI. It is a special-purpose holding company with no employees, no independent business operations, and no revenue. Upon the closing of the Transaction, Halcyon US Holdings Inc. will serve as the direct parent company of VPI, holding 100% of VPI's outstanding equity interests.
Ownership. Halcyon US Holdings Inc. is wholly owned by Halcyon Semiconductor AG. No other person or entity holds any equity interest, option, warrant, or convertible security of Halcyon US Holdings Inc.
C. Post-Closing U.S. Corporate Structure
Upon the closing of the Transaction, HSAG will hold VPI indirectly through the following corporate chain: Halcyon Semiconductor AG (Germany) → Halcyon US Holdings Inc. (Delaware) → Marlowe Asset Management Photonics Inc. (Delaware). VPI will continue to operate as a separate U.S. legal entity following the closing of the Transaction, and its operations will be subject to the terms and conditions of the National Security Agreement ("NSA") currently under negotiation between the parties and CFIUS. The parties anticipate that the NSA will include provisions addressing, among other things, governance, access controls, technology protection measures, and government contract performance requirements, consistent with standard CFIUS mitigation frameworks for transactions involving U.S. businesses with facility security clearances.
Halcyon US Inc. (Austin, Texas), HSAG's existing U.S. subsidiary, will remain a separate subsidiary of HSAG and will not be merged with or into VPI or Halcyon US Holdings Inc. following the closing. The Austin design center will continue to operate independently in its current capacity as a commercial analog and mixed-signal IC design facility.
Organizational charts depicting the pre-closing and post-closing corporate structures of HSAG and its subsidiaries, including VPI, are provided in Exhibit D to the Notice.
IV. VORSTAND (MANAGEMENT BOARD) AND AUFSICHTSRAT (SUPERVISORY BOARD)
Under German corporate law, an Aktiengesellschaft is governed by a two-tier board structure consisting of the Vorstand (Management Board) and the Aufsichtsrat (Supervisory Board). The Vorstand is responsible for the day-to-day management and strategic direction of the company, while the Aufsichtsrat exercises supervisory oversight over the Vorstand, appoints and removes Vorstand members, and approves certain fundamental business decisions as required by law and the company's articles of association (Satzung).
A. Vorstand (Executive Management Board)
HSAG's Vorstand currently consists of five members. Full biographical details, nationalities, government affiliations, and security clearance information for all Vorstand members are provided below.
1. Dr. Maximilian Ehrhardt — Vorstandsvorsitzender (Chief Executive Officer)
Dr. Ehrhardt, age 57, is a citizen of the Federal Republic of Germany. He holds a Diplom-Physiker (equivalent to a master's degree in physics) from Technische Universität Dresden and a Dr. rer. nat. (Ph.D. in materials physics) from the same institution, where his doctoral research focused on wide-bandgap semiconductor materials for power electronic applications.
Dr. Ehrhardt joined HSAG at its founding in 2005, initially serving as the company's Leiter Forschung und Entwicklung (Head of Research and Development). He was appointed to the Vorstand in 2008 as Chief Technology Officer and was named Vorstandsvorsitzender (Chief Executive Officer) in 2011. Dr. Ehrhardt has served continuously at HSAG for eighteen years and has been the principal architect of the company's growth strategy, including its expansion into silicon-carbide power semiconductors and the establishment of HSAG's international operations.
Dr. Ehrhardt does not hold and has never held a U.S. government personnel security clearance at any level. Dr. Ehrhardt has not served in any capacity in the U.S. government. Dr. Ehrhardt has no affiliation with any foreign government, military service, intelligence service, or government-controlled entity of any country. Dr. Ehrhardt has not served in the German military (Bundeswehr) or in any governmental intelligence or security agency.
2. Katarina Brückner — Finanzvorstand (Chief Financial Officer)
Ms. Brückner, age 49, is a citizen of the Federal Republic of Germany. She is a licensed Wirtschaftsprüfer (the German equivalent of a Certified Public Accountant) and holds a Diplom-Kauffrau (equivalent to a master's degree in business administration) from Ludwig-Maximilians-Universität München.
Prior to joining HSAG in 2016, Ms. Brückner held senior finance positions at Sundial Holdings, where she served as Vice President of Corporate Finance, and at Marlowe Holdings, where she served as Regional Finance Director for the EMEA region. She was appointed to the HSAG Vorstand as Finanzvorstand (Chief Financial Officer) in 2018.
Ms. Brückner does not hold and has never held a U.S. government personnel security clearance at any level. Ms. Brückner has not served in any capacity in the U.S. government. Ms. Brückner has no affiliation with any foreign government, military service, intelligence service, or government-controlled entity of any country.
3. Stefan Lohse — Chefjustitiar und Vorstandsmitglied (General Counsel and Management Board Member)
Mr. Lohse, age 52, holds dual citizenship in the Federal Republic of Germany and the United States. He was born in Frankfurt am Main, Germany, and is admitted to practice law both in the State of New York and in Germany (Rechtsanwalt). Mr. Lohse holds a Staatsexamen in law (First and Second State Examinations) from Johann Wolfgang Goethe-Universität Frankfurt and an LL.M. from Georgetown University Law Center in Washington, D.C.
Prior to joining HSAG in 2013, Mr. Lohse practiced corporate and transactional law at Hale & Buchanan LLP in Frankfurt and New York, where he specialized in cross-border M&A transactions in the technology sector. He was appointed to the HSAG Vorstand as Chefjustitiar (General Counsel) in 2017.
Mr. Lohse does not hold and has never held a U.S. government personnel security clearance at any level. Mr. Lohse has not served in any capacity in the U.S. government. Mr. Lohse has no affiliation with any foreign government, military service, intelligence service, or government-controlled entity of any country.
4. Dr. Annika Voss — Vorstandsmitglied, Technik (Chief Technology Officer)
Dr. Voss, age 46, is a citizen of the Federal Republic of Germany. She holds a Diplom-Ingenieur in electrical engineering from RWTH Aachen University and a Dr.-Ing. (Ph.D. in engineering) from ETH Zürich, Switzerland, where her research focused on silicon-carbide device physics.
Dr. Voss joined HSAG in 2010 as a senior device engineer and advanced through the company's engineering organization to lead the SiC Power Semiconductor product division. She was appointed to the Vorstand as Chief Technology Officer in 2021, succeeding Dr. Ehrhardt's former role and assuming responsibility for the company's global research and development strategy.
Dr. Voss does not hold and has never held a U.S. government personnel security clearance at any level. Dr. Voss has not served in any capacity in the U.S. government. Dr. Voss has no affiliation with any foreign government, military service, intelligence service, or government-controlled entity of any country.
5. Jürgen Walther — Vorstandsmitglied, Vertrieb (Chief Commercial Officer)
Mr. Walther, age 54, is a citizen of the Federal Republic of Germany. He holds a Diplom-Kaufmann from Universität Mannheim and an MBA from INSEAD (Fontainebleau, France).
Mr. Walther joined HSAG in 2009 as Vice President of Sales, EMEA, and was promoted to lead HSAG's global sales and marketing organization in 2015. He was appointed to the Vorstand as Chief Commercial Officer in 2019. Mr. Walther oversees HSAG's worldwide sales, marketing, distribution, and key account management functions.
Mr. Walther does not hold and has never held a U.S. government personnel security clearance at any level. Mr. Walther has not served in any capacity in the U.S. government. Mr. Walther has no affiliation with any foreign government, military service, intelligence service, or government-controlled entity of any country.
B. Aufsichtsrat (Supervisory Board)
Composition and Codetermination. Under German law, the Aufsichtsrat of an Aktiengesellschaft with more than 2,000 employees is subject to the requirements of the Mitbestimmungsgesetz (Codetermination Act) of 1976. Accordingly, HSAG's Aufsichtsrat consists of twelve members: six shareholder representatives elected by the shareholders at the annual general meeting (Hauptversammlung), and six employee representatives elected by the employees of HSAG and its German subsidiaries. The employee representatives are HSAG employees or trade union officials elected pursuant to the statutory codetermination process; they are not government appointees, government officials, or representatives of any governmental authority.
Government Affiliations. No member of HSAG's Aufsichtsrat is an official, representative, agent, or employee of any foreign government, including the Federal Republic of Germany or any German state (Land). No member of the Aufsichtsrat holds a U.S. government personnel security clearance at any level. No member of the Aufsichtsrat has any affiliation with any foreign military service, intelligence service, or government-controlled entity.
Shareholder Representatives:
1. Prof. Dr. Heinrich Falkenberg (Chairman of the Aufsichtsrat) — German citizen; age 68; retired professor of electrical engineering, Technische Universität München; independent board member; serves on the boards of two other publicly traded European technology companies.
2. Dr. Claudia Reinhardt — German citizen; age 61; former managing partner of Reinhardt Capital Partners GmbH, a Munich-based private equity firm; independent board member.
3. Lars-Erik Sjöström — Swedish citizen; age 55; Managing Director of Nordic Industrial Holdings AB, a Stockholm-based industrial investment firm; independent board member.
4. Dame Patricia Huxley, DBE — British citizen; age 63; former Chief Executive Officer of Meridian Semiconductors plc (UK); independent board member; appointed Dame Commander of the Order of the British Empire for services to the UK technology sector.
5. Dr. Martin Ostermeier — Austrian citizen; age 50; Managing Director of Alpenland Beteiligungen GmbH, a Vienna-based investment holding company; independent board member.
6. Françoise Delacroix — French citizen; age 58; Senior Advisor, European Affairs, at Westmark Trust Bank; independent board member; former director of the European Investment Bank's technology lending program (a standard EU institutional role, not a government control or ownership position).
Employee Representatives:
7. Thomas Richter — German citizen; age 48; Chairman of the HSAG Works Council (Betriebsratsvorsitzender); employee of HSAG since 2003; production engineer at the Dresden wafer fabrication facility.
8. Sabine Keller — German citizen; age 44; member of the HSAG Works Council; employee of HSAG since 2008; design engineer at the Munich design center.
9. Ralf Bergmann — German citizen; age 56; regional representative of IG Metall (the German metalworkers' trade union); trade union official appointed pursuant to the Codetermination Act.
10. Dr. Eva-Maria Quelwick — German citizen; age 41; employee representative; senior research scientist at the Dresden R&D center; employee of HSAG since 2012.
11. Michael Grünwald — German citizen; age 52; employee representative; facilities operations manager at the Dresden campus; employee of HSAG since 2006.
12. Petra Hoffmann — German citizen; age 47; employee representative; senior applications engineer at the Villach design center; employee of HSAG since 2010.
Full biographical details, nationalities, government affiliations, and security clearance information for all twelve members of the Aufsichtsrat are set forth above and have been provided to CFIUS as required by 31 C.F.R. § 800.501. HSAG confirms that no member of its Aufsichtsrat has any relationship, affiliation, or connection with any government that would give rise to foreign ownership, control, or influence concerns.
V. OWNERSHIP STRUCTURE
A. Public Shareholders
HSAG is publicly traded on the Frankfurt Stock Exchange (XETRA: HLC). HSAG's ordinary shares (Stammaktien) are widely held by institutional and retail investors, with no single shareholder holding a controlling interest. As of the most recent shareholder disclosure available to HSAG (based on notifications received pursuant to the German Securities Trading Act, Wertpapierhandelsgesetz, Sections 33 et seq.), HSAG's ten largest institutional shareholders and their approximate holdings are as follows:
The remaining approximately 60.2% of HSAG's outstanding shares are held by a dispersed base of institutional investors, mutual funds, exchange-traded funds, and retail shareholders. No single shareholder holds 10% or more of HSAG's outstanding shares. No shareholder holds a blocking minority or exercises de facto control over HSAG.
No Government Ownership. No government entity — whether of the Federal Republic of Germany, any German state (Land), the European Union, or any other country — holds any direct or indirect equity interest in HSAG. No sovereign wealth fund holds a material equity position in HSAG. To HSAG's knowledge, based on the shareholder disclosure notifications it has received, no government-controlled investment fund or sovereign wealth fund holds any interest in HSAG exceeding the de minimis levels that may result from passive inclusion in broad market index funds.
B. Absence of Government Ownership, Control, or Influence
HSAG provides the following confirmations regarding the absence of government ownership, control, or influence over HSAG:
(a) Neither the Federal Republic of Germany nor any German state (Land) holds any direct or indirect equity interest in HSAG, whether through share ownership, convertible instruments, options, warrants, or any other form of equity participation.
(b) HSAG has received no investment, equity contribution, or capital infusion from any sovereign wealth fund of any country.
(c) No government subsidies, grants, or incentive payments received by HSAG from any source have conferred upon any government entity any ownership rights, board representation rights, governance rights, or veto rights over HSAG's business decisions.
(d) No foreign government or government-controlled entity holds any equity stake in HSAG, whether directly or through any intermediary.
(e) No foreign government or government-controlled entity has the right to appoint, nominate, or approve the appointment of any member of HSAG's Vorstand or Aufsichtsrat.
(f) HSAG is not subject to any government-directed mandate, directive, instruction, or guidance regarding its business strategy, technology development priorities, product development roadmap, customer relationships, or pricing decisions.
C. Voting Agreements and Shareholder Arrangements
HSAG is not aware of any shareholder agreements, voting trusts, voting pools (Stimmbindungsverträge), or similar arrangements among its shareholders that would confer upon any person or entity, individually or collectively, control or significant influence over HSAG's governance or operations. No foreign government or government-affiliated entity is a party to any agreement, arrangement, or understanding with HSAG or any HSAG shareholder that confers or could confer influence over HSAG's governance, operations, or strategic direction.
HSAG's articles of association (Satzung) do not contain any provisions that grant special voting rights, veto rights, golden shares, or similar preferential governance rights to any shareholder, government entity, or third party.
VI. RELATIONSHIPS WITH GOVERNMENT ENTITIES
A. German Government and European Union
HSAG operates in the semiconductor industry, which is subject to standard regulatory oversight by German and European Union authorities. HSAG's principal regulatory relationships include the following:
Securities Regulation. As a publicly traded company on the Frankfurt Stock Exchange, HSAG is subject to the regulatory oversight of the Bundesanstalt für Finanzdienstleistungsaufsicht ("BaFin"), Germany's federal financial supervisory authority, with respect to securities law compliance, insider trading regulations, and corporate disclosure obligations. BaFin exercises standard regulatory authority over HSAG in its capacity as a listed company; this relationship does not involve any government ownership, control, or influence over HSAG's business operations.
EU Competition Law. HSAG is subject to the competition law jurisdiction of the European Commission's Directorate-General for Competition and the German Federal Cartel Office (Bundeskartellamt) with respect to merger control, antitrust compliance, and abuse of dominance matters. These are standard regulatory relationships that do not involve any government ownership or control over HSAG.
Research Grants and Industry Incentive Programs. HSAG has received, and may in the future receive, research grants, co-funding, and incentive payments from German federal and state government sources and from European Union programs in connection with semiconductor research and development activities. These include funding under the Important Projects of Common European Interest ("IPCEI") framework for microelectronics, which is a multi-country EU program designed to support European semiconductor manufacturing and technology development. HSAG has also received research grants from the Bundesministerium für Bildung und Forschung ("BMBF," the German Federal Ministry of Education and Research) and from the Sächsische Aufbaubank (the development bank of the Free State of Saxony) for semiconductor R&D projects. These grants and incentive payments are standard industry programs available to semiconductor companies operating in Germany and the EU. They do not confer upon any government entity any ownership rights, board representation, governance rights, veto rights, or access to HSAG proprietary technology. HSAG's participation in these programs is voluntary and does not impose any government control over HSAG's business strategy, product development decisions, or customer relationships.
No Government Contractual Control. HSAG does not have any contractual relationship with any German government entity or EU institution that would give such entity influence over HSAG's business decisions, technology direction, or access to HSAG's proprietary technology, trade secrets, or confidential business information.
B. Non-Allied Foreign Governments
HSAG has no ownership, control, or governance relationships with any government classified as a non-allied foreign government or a country of special concern under CFIUS regulations, including but not limited to the People's Republic of China, the Russian Federation, the Islamic Republic of Iran, and the Democratic People's Republic of Korea.
People's Republic of China. As described in Section II.D above, HSAG operates a subsidiary in Shanghai, China — Halcyon Semiconductor (Shanghai) Co., Ltd. — which performs sales, marketing, and application engineering functions for consumer-grade power management integrated circuits in the Chinese market. The following additional details are provided with respect to HSAG's China operations:
(a) Scope of Activities. The Shanghai subsidiary's activities are strictly limited to sales, marketing, and application engineering support for commercial, consumer-grade power management ICs. No research, development, design, or manufacturing activities of any kind are conducted by the Shanghai subsidiary or at any location in the People's Republic of China.
(b) Revenue. FY2022 revenue attributable to the Shanghai subsidiary was $81.4 million (approximately €77.3 million at average 2022 exchange rates), representing approximately 1.3% of HSAG's total consolidated revenue.
(c) Product Scope. The products sold through the Shanghai subsidiary are standard commercial-grade power management ICs designed for consumer electronics applications (e.g., smartphone chargers, laptop power adapters, LED lighting drivers). These products do not include any GaN-based devices, defense-grade components, dual-use semiconductors, or products subject to enhanced export controls.
(d) Government Relationships. The Shanghai subsidiary has no relationships with the government of the People's Republic of China, the Chinese Communist Party, the People's Liberation Army, the Ministry of State Security, or any other Chinese government, military, or intelligence entity. The Shanghai subsidiary does not participate in any Chinese government technology programs, talent programs, or state-sponsored research initiatives. No employee of the Shanghai subsidiary has any affiliation with any Chinese government, military, or intelligence entity, to HSAG's knowledge.
(e) Data and Technology Isolation. The Shanghai subsidiary does not have access to any of HSAG's proprietary design databases, process technology information, or trade secrets related to HSAG's power semiconductor, analog IC, or sensor product lines. The Shanghai subsidiary's information systems are logically and physically segregated from HSAG's global engineering network.
Russia, Iran, North Korea, and Other Sanctioned Jurisdictions. HSAG does not operate any subsidiaries, branches, offices, or facilities in the Russian Federation, the Islamic Republic of Iran, the Democratic People's Republic of Korea, Cuba, Syria, or any other jurisdiction subject to comprehensive U.S. or EU sanctions. HSAG does not have any material business relationships, joint ventures, partnerships, or contractual arrangements with any person or entity located in or controlled by the government of any such jurisdiction.
Foreign Military and Defense Contracts. HSAG does not currently hold, and has not historically held, any contracts with any foreign military or defense ministry for the supply of defense-grade or military-specification semiconductor products. To the extent that HSAG supplies standard commercial-grade semiconductor products to customers in NATO-allied countries whose end-use applications may include defense or security systems, such sales are made on standard commercial terms at arms-length and involve only commercial-grade products that are widely available in the market. HSAG does not design or manufacture any products to military specifications or under controlled program requirements for any foreign military or defense organization.
C. Government Contracts and Security Clearances
Facility Security Clearances. HSAG does not hold a facility security clearance ("FCL") in any jurisdiction, including Germany, the United States, or any other country. HSAG has not applied for and does not possess a German Geheimschutzbetreuervertrag (classified information handling agreement) with the German Federal Ministry of Economics and Climate Action (Bundesministerium für Wirtschaft und Klimaschutz).
U.S. Government Contracts. HSAG's existing U.S. subsidiary, Halcyon US Inc. (Austin, Texas), does not hold any contracts with the U.S. Department of Defense, the U.S. Intelligence Community, or any other U.S. government agency that require access to classified information or performance under controlled program requirements. Halcyon US Inc. is not ITAR-registered and does not hold an FCL.
Personnel Security Clearances. No employee of HSAG or any of its subsidiaries (including Halcyon US Inc.) currently holds a U.S. government personnel security clearance at any level. For the avoidance of doubt, Margaret "Peggy" Ashworth and Lt. Col. (Ret.) David Caruso of Calderwood & Harkness LLP, HSAG's outside legal counsel, hold inactive U.S. government personnel security clearances from prior government service (Ms. Ashworth from prior service at the U.S. Department of the Treasury, Office of International Affairs; Mr. Caruso from prior active-duty service in the U.S. Army Judge Advocate General's Corps). However, Ms. Ashworth and Mr. Caruso are outside counsel to HSAG and are not employees, officers, directors, or agents of HSAG or any HSAG subsidiary.
VII. FOREIGN OWNERSHIP, CONTROL, OR INFLUENCE (FOCI) ASSESSMENT
Based on the information set forth in this Exhibit C and in the other exhibits and attachments to the Notice, HSAG respectfully submits that it presents a manageable foreign ownership, control, or influence ("FOCI") profile for purposes of the national security review of the Transaction. HSAG's FOCI profile is characterized by the following factors:
(a) Widely Dispersed Public Ownership; No Controlling Shareholder. HSAG is a publicly traded company whose shares are widely held by institutional and retail investors. No single shareholder holds a controlling interest, a blocking minority, or a stake exceeding 10% of HSAG's outstanding shares. HSAG's ownership base is dominated by reputable institutional asset managers, pension funds, and mutual fund complexes based in Germany, the United States, the United Kingdom, Sweden, and Switzerland.
(b) No Government Ownership, Direct or Indirect. No government entity of any country holds any direct or indirect equity interest in HSAG. No sovereign wealth fund holds a material equity position in HSAG.
(c) No Sovereign Wealth Fund Investment. HSAG has not received any investment, equity contribution, or capital infusion from any sovereign wealth fund.
(d) No Foreign intelligence or Military Affiliations. No member of HSAG's Vorstand or Aufsichtsrat, and no senior officer or employee of HSAG, has any affiliation with any foreign intelligence service, military organization, or government-controlled entity. HSAG does not design, manufacture, or sell defense-grade semiconductor products and does not hold contracts with any foreign military or defense ministry.
(e) German Ally Status. The Federal Republic of Germany is a member of the North Atlantic Treaty Organization ("NATO"), the European Union, and maintains extensive bilateral defense cooperation agreements and intelligence-sharing arrangements with the United States. Germany is classified as a close ally of the United States and is not a country of special concern under CFIUS regulations. HSAG's home jurisdiction is thus consistent with the allied and partner nation categories that CFIUS has historically viewed favorably in assessing FOCI risk.
(f) Limited China Presence. HSAG's operations in the People's Republic of China are limited to a sales and application engineering subsidiary in Shanghai that generates approximately 1.3% of HSAG's total revenue from the sale of consumer-grade power management ICs. No research, development, design, or manufacturing activities are conducted in China. No GaN, defense-related, or dual-use semiconductor activities of any kind are conducted in China. The Shanghai subsidiary has no relationships with any Chinese government, military, or intelligence entity.
Proposed Mitigation. Notwithstanding HSAG's assessment that it presents a manageable FOCI profile, HSAG acknowledges that the Transaction involves the acquisition of VPI, a U.S. business that holds a Facility Security Clearance (CAGE Code 7VK92, SECRET level) and performs classified and controlled work under contracts with the U.S. Department of Defense and other U.S. government agencies. HSAG is prepared to enter into a National Security Agreement ("NSA") with CFIUS that will function as a Special Security Agreement ("SSA") equivalent to address any residual FOCI concerns arising from HSAG's indirect ownership of VPI following the closing of the Transaction. The proposed NSA framework contemplates the establishment of a Government Security Committee, implementation of access controls and technology protection measures, and other safeguards consistent with standard CFIUS mitigation practice for transactions involving foreign acquirers and U.S. businesses with facility security clearances.
The proposed mitigation framework, including the key terms and conditions of the NSA under negotiation, is described in detail in the body of the Notice and in Exhibit F. The parties remain engaged in ongoing discussions with CFIUS regarding the specific terms of the NSA and are committed to cooperating fully with the Committee in finalizing an agreement that adequately protects U.S. national security interests.
VIII. FINANCIAL SUMMARY
Consolidated Financial Highlights — FY2022
The following table summarizes HSAG's key consolidated financial data for the fiscal year ended December 31, 2022:
Auditor. HSAG's consolidated financial statements are audited by Leinberger & Hess Wirtschaftsprüfungsgesellschaft, with offices at Bockenheimer Landstraße 42, 60323 Frankfurt am Main, Germany. The engagement partner responsible for the HSAG audit is Dr. Markus Hess, Wirtschaftsprüfer. HSAG's financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and are subject to the audit and assurance standards of the Institut der Wirtschaftsprüfer in Deutschland e.V. ("IDW").
Financial Capacity to Complete the Transaction
HSAG has the financial capacity and committed financing necessary to consummate the Transaction at the agreed purchase price. The key financial terms of the Transaction are as follows:
Purchase Price. The aggregate cash purchase price for 100% of the outstanding equity interests of VPI is $1.42 billion, on a cash-free, debt-free basis, subject to a normalized net working capital target of $34.6 million and customary closing adjustments.
Financing. The purchase price and related transaction costs will be funded through a combination of the following sources:
(a) Senior Secured Term Loan. $900 million in aggregate principal amount of senior secured term loan facilities, pursuant to a credit agreement among Halcyon Semiconductor AG, as borrower, Meridian National Bank, as administrative agent, and Atlas Commercial Lending AG and Pacific Basin Credit Corp., as co-lead arrangers. The term loan bears interest at a rate per annum equal to the Secured Overnight Financing Rate ("SOFR") plus 275 basis points, with a maturity date five years from the closing date and annual amortization of 1% of the original principal amount. The credit agreement and related commitment letters are attached as Exhibit G to the Notice.
(b) Equity Contribution. Approximately $520 million in equity contribution from HSAG, funded from a combination of HSAG's balance sheet cash and cash equivalents and a draw of €300 million (approximately $327 million at current exchange rates) on HSAG's existing revolving credit facility with Rheinische Handelsbank AG, Frankfurt am Main. The revolving credit facility has a total commitment of €750 million, of which approximately €420 million was undrawn as of June 30, 2023.
Escrow. $71 million (representing 5% of the purchase price) will be deposited into an escrow account held at Pinnacle Trust Company, N.A. in accordance with the terms of an escrow agreement among the parties. The escrow funds will secure the sellers' indemnification obligations under the stock purchase agreement for a period of eighteen months following the closing date, subject to certain specified exceptions.
Earnout. In addition to the base purchase price, the sellers may be entitled to receive up to $85 million in contingent earnout payments, payable in two tranches based on the achievement of specified government-contract revenue milestones by VPI during the calendar years 2024 and 2025:
• CY2024 Tranche: Up to $50 million, payable if VPI achieves specified government-contract revenue targets for the twelve-month period ending December 31, 2024.
• CY2025 Tranche: Up to $35 million, payable if VPI achieves specified government-contract revenue targets for the twelve-month period ending December 31, 2025.
The specific revenue milestones, measurement methodologies, and payment mechanics for the earnout are set forth in Article 3 of the Stock Purchase Agreement, which is attached as Exhibit A to the Notice.
Maximum Aggregate Consideration. The maximum aggregate consideration payable by HSAG in connection with the Transaction, including the base purchase price and the full earnout amount, is $1.505 billion ($1.42 billion + $85 million).
IX. LEGAL AND REGULATORY COMPLIANCE
A. Export Control and Sanctions Compliance
HSAG maintains a comprehensive global trade compliance program designed to ensure compliance with all applicable export control, sanctions, and trade restriction regimes, including:
(a) EU Council Regulation (EC) No. 428/2009 (as recast by Regulation (EU) 2021/821) establishing the EU dual-use export control regime;
(b) U.S. Export Administration Regulations ("EAR"), 15 C.F.R. Parts 730–774, to the extent applicable to HSAG's activities extraterritorially or through re-export and deemed export obligations;
(c) U.S. economic sanctions programs administered by the Office of Foreign Assets Control ("OFAC") of the U.S. Department of the Treasury, to the extent applicable extraterritorially to non-U.S. persons;
(d) German Foreign Trade and Payments Act (Außenwirtschaftsgesetz, "AWG") and the German Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung, "AWV"); and
(e) Other applicable national export control regimes in jurisdictions in which HSAG operates, including Japanese, South Korean, and UK export control regulations.
HSAG's trade compliance program includes designated trade compliance officers at each major operating location, automated screening of customers, end-users, and intermediaries against applicable restricted party lists, end-use and end-user verification procedures, classification and licensing management processes, and regular training for relevant personnel.
HSAG has not been the subject of any enforcement action, penalty, or adverse finding by OFAC, BIS, DDTC, or any equivalent EU, German, or other national authority in connection with export control or sanctions violations. HSAG has not been debarred, suspended, or denied export privileges by any government authority.
B. Anti-Corruption and Anti-Bribery
HSAG maintains a global anti-corruption and anti-bribery compliance program designed to ensure compliance with all applicable anti-corruption laws, including the U.S. Foreign Corrupt Practices Act of 1977, as amended ("FCPA"), the UK Bribery Act 2010, and applicable German anti-corruption statutes (including Sections 331–338 of the German Criminal Code, Strafgesetzbuch). HSAG's anti-corruption program includes a global code of conduct, policies and procedures addressing gifts, hospitality, facilitation payments, and third-party intermediary due diligence, a confidential reporting and whistleblower mechanism, and regular compliance training for employees and agents.
HSAG has not been the subject of any enforcement action, investigation, or adverse finding by any governmental authority in connection with bribery, corruption, or related offenses. No current or former officer, director, or employee of HSAG has been charged with or convicted of bribery, corruption, or related offenses in connection with their activities on behalf of HSAG.
C. Litigation and Government Investigations
As of the date of this filing, HSAG is not a party to any material pending litigation, arbitration, or governmental investigation that relates to national security, export controls, sanctions, espionage, technology transfer, or any other matter that would be material to CFIUS's review of the Transaction. HSAG is engaged in routine commercial litigation matters in the ordinary course of its business, none of which are material to the Transaction or to the national security considerations relevant to CFIUS's review.
HSAG has no adverse CFIUS history. HSAG has not previously been a party to a CFIUS filing, whether as an acquiring person, a target, or otherwise. No CFIUS review or investigation has previously been conducted with respect to any transaction involving HSAG.
D. Data Privacy and Protection
HSAG is subject to the General Data Protection Regulation (Regulation (EU) 2016/679) ("GDPR") and maintains comprehensive data privacy compliance programs across its European operations, including the appointment of a Data Protection Officer (Datenschutzbeauftragter), data processing agreements with third-party vendors, data protection impact assessments for high-risk processing activities, and breach notification procedures.
HSAG's enterprise information security management system is certified under ISO/IEC 27001:2013, the international standard for information security management. HSAG undergoes annual surveillance audits and periodic recertification audits to maintain its ISO 27001 certification. HSAG's cybersecurity program includes network segmentation, access controls, intrusion detection and prevention systems, encryption of data in transit and at rest, vulnerability management, and incident response capabilities.
X. ADVISORS AND COUNSEL
The following advisors and counsel are engaged by HSAG in connection with the Transaction:
Buyer's U.S. Counsel:
Calderwood & Harkness LLP 399 Park Avenue, 31st Floor New York, NY 10022
and
1750 K Street NW, Suite 800 Washington, DC 20006
• Responsible Partner (M&A): Beatrice Holloway
• Lead CFIUS Counsel: Margaret "Peggy" Ashworth, Of Counsel (National Security & CFIUS Practice)