US to block Chinese takeover of German chip equipment maker Aixtron
19 November 2016
German chip equipment maker Aixtron SE yesterday said that the US Committee on Foreign Investment (CFIUS) had told it that it would recommend blocking its takeover by China's Fujian Grand Chip Investment Fund (GCI).
Aixtron said that CFIUS, which reviews deals that may be national security risks, plans to recommend to the US president blocking the deal due to security concerns and advised the companies to drop the deal.
''CFIUS did not issue a close-out letter, but rather informed GCI and AIXTRON that, from CFIUS' perspective, there are unresolved US national security concerns regarding the proposed transaction. CFIUS informed the parties that it plans to recommend to the US President that the transaction be prohibited based on CFIUS' conclusion that there would be no reasonable way to mitigate the US national security risks perceived by CFIUS on the basis of the mitigation proposals submitted by the parties to date. As a consequence thereof, CFIUS recommended the parties request withdrawal of their notice and abandon the entire transaction,'' Aixtron said in a statement.
''GCI and Aixtron plan to continue to actively engage in further discussions to explore means of mitigation that may be amenable to CFIUS or the U.S. President to resolve outstanding US national security concerns or to take other alternative measures that could allow the parties to proceed with the transaction,'' the statement added.
German newspaper Handelsblatt had last month reported that US intelligence agencies had warned Germany on the deal saying that the acquisition could give Beijing access to technology that could be used for military purposes.
Although the German government had earlier approved the deal, but late last month it withdrew its approval without giving any reasons for reversing its decision. (See: Germany withdraws approval of Chinese takeover of technology company Aixtron)
Under German law, the government can block takeovers if it decides that the deal could harm energy security, defence or financial stability.
In late May, Fujian Grand Chip, 51 per cent owned by Chinese businessman Zhendong Liu, struck a deal to buy Aixtron for €670 million ($728.89 million).
Under the terms of the deal, Aixtron will continue to be based in Herzogenrath, maintain its three technology hubs at its German headquarters, in Cambridge in the UK, and Sunnyvale in the US.
Aixtron's CEO, Martin Goetzeler and COO Bernd Schulte will continue to run the company post acquisition.
Aixtron, based in Herzogenrath, Germany, specialises in manufacturing metalorganic chemical vapour deposition equipment, for clients in the semiconductor industry.
Chinese companies have recently targeted German companies for their superior technology and had spent around $11 billion on buying German companies this year, breaking the 2014 record of $2.6 billion.
German economy minister Sigmar Gabriel, who is also Chancellor Angela Merkel's deputy, has been opposing Chinese takeover of German technology companies and had sought the European Union (EU) approval to give powers to countries in the EU to block or impose conditions on shareholdings of non-EU companies.
Gabriel's opposition to Chinese takeovers of German tech companies after China's Midea Group acquired German robot maker Kuka AG although the deal was opposed by several lawmakers.
Some of the recent high-profile takeovers of German companies by Chinese include China National Chemical Corp's $1 billion purchase of KraussMaffei Group, a cutting-edge equipment maker that processes plastics and rubber, a consortium led by Chinese LED specialist MLS acquired Osram's lamp unit for more than €400 million, Beijing Enterprises acquired German waste management company EEW for €1.44 billion, and ChemChina agreed to buy German machinery maker KraussMaffei Group for €925 million.