President Donald Trump on Wednesday issued an order blocking Canyon Bridge Capital Partners LLP s $1.3 billion plan to acquire Lattice Semiconductor Corp. (LSCC) .

Canyon Bridge is a private equity fund backed by China Venture Capital Fund Corp. Ltd., a Chinese corporation owned by Chinese state-owned entities that manages industrial investments and venture capital.

Trump's decision follows the recommendation of the Committee on Foreign Investment in the U.S.

Lattice said in securities filing Sept.1 that Cfius told the companies it would recommend that Trump suspend or prohibit the proposed merger. CFIUS is the Treasury Department-led interagency panel charged with reviewing foreign acquisitions of U.S. assets for national security threats.

Federal law authorizes the president to prohibit acquisitions by foreign buyers if he concludes there is credible evidence that the buyer's exercise of control might impair U.S. national security.

According to the White House, the national-security risk posed by the transaction includes "the potential transfer of intellectual property to the foreign acquirer, the Chinese government's role in supporting this transaction, the importance of semiconductor supply chain integrity to the United States Government, and the use of Lattice products by the United States Government."

Canyon Bridge officials said, "We are obviously disappointed in today's decision by the President of the United States to forgo what we believe to be an excellent deal for Lattice's shareholders and its employees by expanding the opportunity to keep jobs in America."

Going forward Canyon Bridge said, "We remain focused on other investment opportunities where we can work with exceptional companies to create jobs and grow revenue."

In its Sept. 1 filing Lattice said it remained convinced that the transaction does not raise any national security concerns that couldn't be addressed by mitigation measures it and Canyon Bridge had proposed to implement.

After CFIUS notified the companies that it intended to recommend the merger be blocked, Lattice said it hoped to convince President Trump that the benefits of the proposed transaction to Lattice's stockholders and employees in the United States, and the substantial mitigation measures proposed by the parties justified the president overruling the national security panel.

The Lattice deal is only the fourth transaction ever blocked by a U.S. president under the CFIUS statute. Most parties choose to terminate their deals when CFIUS recommends against a transaction rather than forcing the president's hand.

Stephen Paul Mahinka, a Morgan, Lewis & Bockius LLP partner who handles CFIUS reviews, said the parties' attempt to persuade Trump to approve the transaction due to its impact on Lattice employment and business prospects is noteworthy.

"It appears to clearly have been based on an end-run of national security issues, with a focus on the deal's asserted effects on job creation and maintenance, attempting to appeal to the President's desire to promote employment," he said.

The deal wouldn't have been likely to be approved under the Obama Administration nor did Mahinka think Trump would accept the companies' argument either.

But the mere fact that Lattice and Canyon Bridge tried to make an economic argument to counter the national security concerns shows others might take a similar tack if Trump or Congress expands the type of issues CFIUS must consider in judging whether a merger poses a risk to the U.S.

"I did not think this approach would work in this context, but an interesting issue is whether, if employment effects are included in any future Executive Order on how CFIUS should assess filings or in new legislation, labor effects could overbalance security concerns, at least in industry contexts of less direct and consequential concern than semiconductors," he said.

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