For the second time in a little more than a year, the secretive
U.S. agency that vets global deals on national-security grounds is
objecting to a Chinese takeover of a European company.
Late Friday, technology company Aixtron SE of Germany said that
it was informed by the Committee on Foreign Investment in the U.S.,
or CFIUS, about "unresolved U.S. national security concerns
regarding the proposed transaction."
Aixtron hasn't said exactly why the U.S. objected. But the
committee has become increasingly active in overseas deals,
weighing in when it perceives a potential threat to U.S. security,
even if neither side in a potential transaction is American.
Friday's disclosure came after Germany's economics ministry late
last month withdrew its earlier approval and reopened a review of
the €670 million ($710 million) acquisition of Aixtron by Grand
Chip Investment GmbH, the German unit of Fujian Grand Chip
Investment Fund LP of China.
People familiar with the matter said the German government's
step came after it was notified by U.S. authorities of their
concerns over certain technologies.
Both moves were made amid heightened security concerns among
Western governments over a high-tech shopping spree by Chinese
companies. Still, CFIUS's role in weighing in on the deal is
unusual because it doesn't technically have jurisdiction over
either of the two companies involved.
CFIUS declined to comment on Sunday.
The planned Aixtron acquisition is the latest deal involving
non-U.S. companies to attract the committee's attention.
Dutch electronics company Royal Philips NV early this year
canceled a planned $2.8 billion sale of its lighting-component and
automotive-lighting unit to a Chinese investor, after Philips
disclosed in October 2015 that CFIUS had raised "certain
unforeseen" concerns with that deal.
CFIUS also reviewed last year's $16.6 billion merger between
Finnish wireless-equipment company Nokia Corp. and French rival
Alcatel-Lucent SA. In August, seed and pesticide maker Syngenta SA
and China National Chemical Corp. disclosed CFIUS had approved
ChemChina's $43 billion takeover of its Swiss rival. That deal is
still being scrutinized by antitrust officials.
Aixtron, a chip-equipment manufacturer, said Friday CFIUS
recommended the parties "abandon the entire transaction" and that
the authority plans to recommend that U.S. President Barack Obama
block the deal because there are no possible remedies to mitigate
concerns.
People familiar with the work of CFIUS suspect that a new,
highly efficient semiconductor technology based on gallium nitride,
or GaN, could have been the stumbling block for the Aixtron
deal.
CFIUS includes representatives from 16 U.S. departments and
agencies, including the Treasury, Homeland Security and Defense
departments. Its deliberations are confidential, and some analysts
and investors regard the process as opaque.
GaN technology can improve military applications such as radar
transmitters by boosting their power while consuming less
electricity. Aixtron has been selling products focused on GaN for a
number of years to companies including U.S. defense contractor
Northrop Grumman Corp. The company, like its rival Raytheon Co.,
has signed contracts with the U.S. military over products that use
GaN technology.
The Pentagon has bet heavily on the use of GaN to improve the
performance of some of its most sophisticated weapons. The
technology is being pursued to boost performance of efforts such as
a U.S. Navy program to jam enemy radar, as well as an antimissile
system known as Terminal High-Altitude Area Defense, or Thaad, to
be deployed in South Korea against North Korea's long-range rocket
threat.
Aixtron said that Mr. Obama "must now render his decision to
block or allow the proposed transaction within 15 calendar
days."
A spokesman for Fujian Grand Chip Investment declined to
comment.
Shares in Aixtron fell about 4% in Germany's after-hours trading
late Friday.
The company has been struggling over recent years, especially
after Sanan Optoelectronics Co. of China cut back on a large order
late last year. The move slashed nearly half of Aixtron's market
value and left the company looking for a buyer.
Months later, Grand Chip Investment, another Chinese enterprise
from Fujian province, offered to buy Aixtron.
Aachen, Germany-based Aixtron produces machines that cut wafers
into products used in chips. It is one of the largest rivals of
Applied Materials Inc. and Veeco Instruments Inc. of the U.S.
Aixtron and Veeco each posted third-quarter net losses amid
lower revenues, and some analysts have said Aixtron needs a
financially strong partner or owner.
The machine makers are heavily reliant on the chip industry and
spend more than one-quarter of their revenue on research and
development of new products. If a new technology faces delays
coming to market, Aixtron and Veeco sit on investments that don't
pay off.
In Germany, lighting company Osram Licht AG is seeking approval
from the German government for the sale of its lightbulb businesses
to MLS Co. of China.
Sanan and MLS have both considered acquiring all of Osram,
people familiar with the matter said earlier. Those people added it
is unlikely that a move to buy Osram would now be feasible given
political backlash amid resistance from labor unions.
CFIUS's stance on Aixtron also might portend close scrutiny for
the proposed $5 billion takeover of German robotics company Kuka AG
by Midea Group of China. The deal, which was first reported by The
Wall Street Journal in May, is still waiting approval from a number
of regulators. Sensitivity about the deal has been high because
Kuka supplies top German industrial companies and U.S. defense
contractors.
Robert Wall contributed to this article.
Write to Eyk Henning at eyk.henning@wsj.com
(END) Dow Jones Newswires
November 20, 2016 20:35 ET (01:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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