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December 3, 2016

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China: Avoid politics in takeover of Aixtron

CHINA yesterday appealed to Washington and Berlin to avoid injecting politics into the proposed takeover of a German maker of semiconductor manufacturing equipment following a report US President Obama plans to oppose it as a security risk.

The proposed 670-million-euro (US$740 million) acquisition of Aixtron SE by Fujian Grand Chip Investment Fund is “normal business activity,” said Geng Shuang, a foreign ministry spokesman.

“Since it’s a normal commercial activity, it will be carried out following the rule of markets and business,” said Geng. “We hope the external parties will not over-interpret that or make any political intervention.”

Bloomberg News, citing sources, reported Obama was preparing to block the deal.

Aixtron said it has not received a ruling from Obama about whether the takeover could proceed.

A company spokesman yesterday said if Obama formally blocked the deal, the transaction would be called off. Aixtron has said it would be forced to cut jobs and scale down if the transaction fails.

Last month, the Committee on Foreign Investment in the United States recommended that Aixtron’s sale to the Chinese investment fund be stopped due to security concerns.

US concerns over China gaining access to the production of gallium nitride — a powdery yellow compound used in light-emitting diodes, radar, antennas and lasers which is grown using Aixtron-manufactured technology — was the main reason for the block, according to security sources.

CFIUS never gives reasons for its decisions. But sources previously said it blocked the US$3.3 billion sale of Philips’ lighting business, Lumileds, to a consortium of Chinese investors in January over gallium nitride concerns.

Another source said Aixtron’s nanotube technology acquired through its 2007 acquisition of a Cambridge-based company Nanoinstruments was a concern too. Their products also have military applications.

Analysts fear Aixtron has a bleak future as a standalone company as it struggles with overcapacity in a market dominated by Chinese buyers.

Tim Wunderlich, analyst at German brokerage Hauck & Aufhaeuser, said last month when it became clear the deal might be blocked that Aixtron needed a white knight from Europe or the US to have a viable future.

Chinese companies have made multibillion-dollar takeovers in Europe to obtain technology and brands including Club Med, Pirelli tires and Volvo Cars. Many Europeans welcome the influx of money at a time when economic growth is struggling.

Aixtron, based in Herzogenrath, says its headquarters, research and development operations and existing technology will remain at its current sites.

The German government said on Monday that it was reconsidering whether to allow the takeover. A spokeswoman cited “security-related questions” but gave no explanation.

In 2012, Obama blocked Chinese-owned Ralls Corp from building a wind farm near a naval base in Oregon. In 1990, then-President George Bush blocked the purchase of MAMCO Manufacturing Inc, a maker of aircraft parts, by a Chinese state-owned company.



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