On Friday, President Obama blocked a Chinese investment fund from buying a German company – yes, America can do that. (Tweet this)
What does this mean?
The US government reviews all foreign takeovers of companies with US operations solely for their impact on national security – and can block a foreign entity from controlling any company that does business in America (unless they cease doing business there). In this case, Aixtron, a German semiconductor company, was going to be bought by a Chinese investment fund that’s part-owned by the Chinese government. Aixtron has a facility in Sunnydale, California where it employs about 100 people – and in Obama’s words, Chinese ownership of the company “threatens to impair US national security.”
Why should I care?
The bigger picture: China is possibly trying to learn from the western companies it’s buying. When ChemChina agreed to buy Syngenta, the Switzerland-based agrochemical company, many thought the motivation was at least partly driven by a desire to obtain expertise related to efficiently producing food, i.e. for China’s one billion-plus people. Obtaining technical expertise in other areas might have more sinister motivations. The blocking of the Aixtron deal is a sign of a wider political backlash (including in Germany) against the recent Chinese buying spree.
For markets: Aixtron stock has taken a beating. Aixtron shares are down more than 30% since an influential US government committee first recommended Obama block the deal in October. The company is not profitable and it operates in a highly competitive industry – which is a tough combination. Other mid-sized European semiconductor firms also fell in value as the news broke on Friday, partly because it’s now less likely that they will be bought by a Chinese company.
Originally posted as part of the Finimize daily email.
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