Aixtron Sees Slim Path to Save China Sale After Obama Order

(Bloomberg) -- Aixtron SE was left with a narrow path to salvage its sale to Chinese investors when it became apparent that U.S. President Barack Obama’s opposition was limited to the sale of the semiconductor-equipment supplier’s U.S. assets.

While Obama upheld a recommendation by the Committee on Foreign Investment in the U.S. (CFIUS) that the sale to Grand Chip Investment GmbH should be stopped, he appeared to link his decision to the U.S. business. That means Aixtron, based in Herzogenrath, Germany, could sell the U.S. unit or modify its legal structure to convince regulators, Equinet analyst Victoria Kruchevska said Monday.

The decision leaves “Aixtron some further room for strategic options to sell it to the Chinese investor after all,” Kruchevska said in an e-mailed note.

Aixtron and the bidder are looking for “solutions" that would satisfy the president’s order and are also checking with German authorities evaluating the sale, Guido Pickert, a spokesman for the company, said Monday by phone. The company noted in a regulatory filing over the weekend that Obama’s order was "limited to the U.S. business and did not prohibit the acquisition of Aixtron shares.”

Impeding the 670 million euro ($713 million) acquisition frustrates China’s ongoing quest to buy Western engineering prowess, which has sparked political concerns about foreign ownership both in Europe and the U.S. China is particularly intent on developing its own semiconductor production to lessen its dependence on foreign technology.

Obama’s decision is interfering in a regular business transaction, Lu Kang, a spokesman for China’s foreign ministry, said Monday.

“We hope the U.S. side can stop such blockage on no solid facts and actually provide a level playing field and conveniences for Chinese companies because this serves the common interests of all parties," he told reporters in Beijing.

CFIUS, which reviews purchases of U.S. companies by foreign buyers, pays close attention to purchases of technology with defense applications. The Aixtron subsidiary in California employs about 100 people in the U.S. and generates about 20 percent of company sales, with customers including defense contractor Northrop Grumman Corp. Aixtron and the bidder have 30 days to salvage the deal after the president’s decision.

Aixtron rose 0.47 percent to 3.85 euros at 10:38 a.m. in Frankfurt.  

While Grand Chip Investment may be willing to take over Aixtron without its U.S. business and its intellectual property there, such a deal still faces potential hurdles, said Harald Schnitzer, an analyst at DZ Bank.

“We doubt that GCI would be prepared to pay 6 euros per Aixtron share in such a case,” Schnitzer said in an e-mailed note.

The German economy ministry is also reviewing the sale. It remains “unclear” how German authorities will decide, Schnitzer said.