Obama Blocks Chinese Takeover Attempt


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What's going on?

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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