Chinese Tech Company Completes CFIUS-Ordered Divestment, Publishes NSA
China-based Borqs Technologies said it completed its divestment of Hawaii-based energy storage system company Holu Hou Energy (HHE) about two years after the Committee on Foreign Investment in the U.S. ordered it to do so.
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Borqs said it officially completed its sale of HHE as of March 6, according to its most recent SEC filing this month.
The company had received a CFIUS letter in December 2022 about entering into a national security agreement with the committee to undo the company’s 2021 purchase of HHE. CFIUS had determined the investment raised national security concerns tied to China’s potential access to HHE’s technology and that those risks couldn’t be mitigated (see 2212300005).
In March 2023, Borqs entered into the national security agreement with the Treasury and Defense departments, which called for the company to divest from HHE within six months unless it received an extension from the U.S. government, according to a copy of the agreement published by the company this month. The deal required Borqs to hire a “nationally recognized investment bank with experience in administering competitive sales and auction processes” to help with the divestment, hire and assign “security and monitoring personnel to directly communicate” with the U.S. government, remove its “administrative and technical influence” over HHE, and create a “plan” to divest all its investment interests in HHE.
That included measures barring HHE from hiring any Borqs employees or any "individual introduced by Borqs." HHE was also barred from incorporating any technology or equipment "sourced from or through Borqs or its affiliates" and conducting certain "communication" with Borqs.
The NSA set out "milestones" that Borqs needed to meet so Treasury and Defense could assess the company's "progress towards the divestment." Borqs was also required to submit status reports to both agencies at least once every 30 days.