Canyon Bridge Capital Partners LLC, the China-backed buyout fund that agreed to acquire Lattice Semiconductor Corp (LSCC.O) in November for $1.3 billion, has resubmitted the deal for U.S. government review, three people familiar with the matter said.

The move comes after the Committee on Foreign Investment in the United States (CFIUS), a government panel which reviews acquisitions by foreign entities for potential national security risks, did not complete its assessment by Friday, within the maximum time of 75 days that is awarded for assessing applications.

Refiling the deal with CFIUS resets the clock and gives it additional time of up to another 75 days for it to complete its national security review and discuss potential issues with the companies, the sources said.

Another factor in Canyon Bridge and Lattice resubmitting the application was that the vacancies left in senior positions at several government agencies more than two months after the inauguration of U.S. President Donald Trump have reduced the panel's capacity to review cases expeditiously, two of the sources added.

The development does not necessarily spell trouble for the deal. Some transactions which previously refiled their application with CFIUS, including ChemChina's $43 billion acquisition of Swiss seeds and pesticide maker Syngenta AG (SYNN.S), were subsequently approved.

Canyon Bridge and Lattice had previously said they had expected the deal to close in early 2017.

"Since announcing our partnership with Canyon Bridge in November 2016, we have had continued, ongoing and productive discussions with CFIUS. We look forward to working closely with the committee throughout its review," Lattice said in a statement. Lattice declined to comment on the refiling of the deal with CFIUS. Canyon Bridge also offered no comment.

CFIUS did not respond to requests for comments.

FROM OUTRIGHT ACQUIRER TO SOLE INVESTOR

Canyon Bridge co-founder Benjamin Chow's intention was to create a deal structure that would minimize U.S. government scrutiny, three sources told Reuters.

A China-born American, Chow was working for a Chinese state-backed entity called China Reform Fund Management when he decided, in the middle of deal talks with Lattice last August, to set up Canyon Bridge in Palo Alto, California, according to Lattice's proxy statement to its shareholders. For a timeline on the deal, click

This changed the role of China Reform, which is controlled by the top decision-making body of the Chinese government, from outright Lattice acquirer to sole investor in Canyon Bridge.

China Reform did not respond to requests for comment.

Reuters revealed last November that China Reform Fund Management was the sole investor in Canyon Bridge. After that story, several U.S. lawmakers wrote to U.S. Treasury Secretary Jacob Lew asking for U.S. regulators to block the deal.

Lattice has argued that its chips do not have military applications, and are not therefore a security risk. The company's shares, however, are trading at around $7 per share, well below the deal price of $8.30 per share, indicating investor concern that CFIUS could find that some of its chips have potential to be used in military equipment in the future.

Most foreign buyers of U.S. companies with activities that potentially affect national security file their deals with CFIUS. When they register, they indicate whether they think the deal requires a full review, known in CFIUS terminology as a covered transaction.

    While Chow was not seeking to conceal the involvement of China Reform in the deal, he believed a buyout fund based in the United States bidding for Lattice would trigger the minimum amount of scrutiny by CFIUS compared with a Chinese buyer, according to three people close to the deal, who requested anonymity to discuss the deliberations.

Chow's plan called for registering the deal with CFIUS as a non-covered transaction, indicating its position to CFIUS that no review was merited, according to the sources.

Chow told Reuters in a statement that he created Canyon Bridge "to attract a broad base of general partners and limited partners," though he did not identify any new investors beyond China Reform. He did not comment on whether Canyon Bridge was also aimed at minimizing CFIUS scrutiny, but added that he always expected to file for a CFIUS review.

COVERED TRANSACTION

CFIUS decisions are not made public, making it difficult for acquirers to know in advance how CFIUS would likely view a case without the advice of regulatory lawyers who deal regularly with the secretive panel.

Canyon Bridge's U.S. law firm, Jones Day, supported Chow's plan, taking the view that a U.S. limited partnership backed by Chinese investment with no governance rights over the U.S. partnership would not be viewed as a foreign-controlled entity by CFIUS, and therefore the deal would not trigger a review, according to the sources.

A Jones Day spokesman did not respond to several requests for comment by telephone and email.

Lattice and its lawyers disagreed because of Canyon Bridge's reliance on a single Chinese-controlled investor, according to the sources. They convinced Canyon Bridge to call in law firm Covington & Burling LLP for a second opinion, which also backed Lattice's view, the sources said. Covington & Burling did not respond to a request for comment.

Lattice eventually convinced Chow that they should both plan to file the deal with CFIUS as a covered transaction, indicating to CFIUS it should get a review.

"As we made clear at the time of our announcement and in our proxy statement, we have always been committed to the CFIUS process. We first reached out to CFIUS months before selecting a strategic partner and reached out to it again after entering negotiations with Canyon Bridge, but before signing an agreement," Lattice said in a statement.

   By that stage however, Canyon Bridge was already formed. While it only had one investor, Chow wanted to keep it to potentially attract more investors in the future, the sources said. The deal was announced on Nov. 3, with Canyon Bridge, rather than China Reform, as the acquirer.

(Reporting by Liana B. Baker in San Francisco and Greg Roumeliotis and Koh Gui Qing in New York; Editing by Carmel Crimmins and Edward Tobin)