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October 25, 2016

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Germany blocks Chinese firm’s deal for Aixtron

THE German government has withdrawn its approval for a Chinese takeover of chip equipment maker Aixtron, citing security concerns and throwing up an unexpected hurdle for a 670-million-euro (US$728 million) deal on the home stretch.

The government had cleared the deal on September 8 but Aixtron said yesterday that the Economy Ministry had now canceled the clearance certificate for Fujian Grand Chip Investment Fund LP (FGC), a Chinese investment fund controlled by businessman Liu Zhendong, and planned to reopen a review of the takeover.

The decision to rescind the approval was based on “previously unknown security-related information,” Germany’s Deputy Economy Minister Matthias Machnig told German daily newspaper Die Welt, without being more specific.

The ministry declined to provide details on how long its review might take.

The government’s move comes as protectionist noises from Berlin grow louder and just a week before Economy Minister Sigmar Gabriel is due to travel to China with a business delegation.

There is rising concern over whether the government should do more to protect strategic technologies following a series of bids for German companies by Chinese investors this year.

In the 4.5-billion-euro takeover of German industrial robot maker Kuka by Chinese household appliance maker Midea earlier this year, Berlin initially sought a deal to limit Midea’s stake to 49 percent.

It had wanted to curb Midea’s influence on what it viewed as a national champion in its push to digitalize German industry, but eventually allowed the takeover after major German shareholders in Kuka sold their stakes to Midea.

Under German law, the government can block takeovers only if they jeopardize energy security, defense or financial stability.

In June, Gabriel called for a Europe-wide safeguard clause which could stop foreign takeovers of firms whose technology is deemed strategic for the future economic success of the region.

Eric Schweitzer, president of Germany’s DIHK Chambers of Industry and Commerce, warned against putting up further hurdles to Chinese investment in an interview published in German newspaper Handelsblatt yesterday.

German foreign investment in China was worth more than 40 billion euros in 2014, far outweighing Chinese investment in Germany of roughly 1.4 billion, according to the foreign ministry.

However, a sharp increase in Chinese business takeovers in Europe — which jumped 44 percent last year as Beijing pushes firms to expand their global presence — has brought the issue to the forefront of political attention.

In the latest sign of Chinese appetite for German technology, chipmaker Sanan Optoelectronics has said it had been in contact with lighting group Osram about a potential acquisition or cooperation deal.

MM Warburg analyst Malte Schaumann said a move by Berlin to block the takeover of Aixtron would also have negative implications for a deal between Sanan and Osram.

Aixtron executives have backed FGC’s offer, which ended on Friday.

The German company has been trying to return to profit in the face of overcapacity. Aixtron executives have warned that the company’s only alternatives to the deal with FGC would be to keep investing its scant funds in new technology in hopes of a recovery of demand, or to cut its business and its workforce.



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