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Analysts say Despite U.S. Block, Aixtron Could Revive Takeover

Analysts say Despite U.S. Block, Aixtron Could Revive Takeover
If the German semiconductor equipment maker sells its Silicon Valley division to get around U.S. objections, analysts said that the sale of Aixtron to Chinese investors could go ahead under new terms.
Aixtron U.S., the division of the Germany company in California where nearly a fifth of its 713 workforce is based, was stopped from being bought over by Fujian Grand Chip Investment Fund (FGC) on Friday by U.S. President Barack Obama.
After Washington blocked the sale by Philips of its U.S. lighting business to Asian buyers, this refusal is seen as a sign of growing concern in the West about the acquisition of cutting-edge technology by Chinese players even though the 670 million euro ($717 million) deal is small.
Aixtron is that it makes devices which produce crystalline layers based on gallium nitride that are used as semiconductors in weapons systems.
The U.S. Treasury Department said on Friday the deal had been blocked due to national security risks as the German firm's technology is being used to upgrade both U.S. and foreign-owned Patriot missile defense systems.
Sparking hopes among analysts that a deal could be revived, albeit under revised terms, Aixtron said, however, the U.S. order "was limited to the United States business and did not prohibit the acquisition of Aixtron shares".
"Chinese investors might be willing to take over Aixtron without its U.S. business including U.S. patents and patent applications. That could be possible but we doubt that GCI would be prepared to pay 6 euros per Aixtron share in such a case," DZ Bank analyst Harald Schnitzer said in a client note.
With the Chinese foreign ministry calling it "political obstruction", the U.S. decision to block the Aixtron deal angered China.
Saying that the Aixtron deal was purely a commercial matter, ministry spokesman Lu Kang said China had always supported Chinese firms investing overseas on the basis of market principles, international rules and respecting local laws.
"China resolutely opposes the politicization of any normal commercial takeover or the wrong move of political obstruction," Lu told a news briefing. China hopes that the U.S. would provide a fair environment for them and would stop making "groundless accusations" against Chinese firms, Lu added.
Fujian Grand Chip could not immediately be reached for comment.
As it struggles in an overcrowded market where Chinese companies call the shots, analysts have said Aixtron has a bleak future as a stand-alone company.
While analysts said a white knight bidder for Aixtron such as U.S. chip equipment maker Applied Materials could emerge, Aixtron has also said it needs to cut costs and jobs if the deal falls through.
The German Economy Ministry is doing its own review of the transaction after it withdrew its approval for the Chinese acquisition in October and this is another obstacle for the deal.
The German ministry said that the process would continue and was independent of the U.S. review.
"There is still a quite low probability of the deal going through as planned. But the ball is back in German court as the German Economy Ministry's review of the Chinese takeover bid is ongoing," a Frankfurt-based trader said.

Christopher J. Mitchell

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