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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 thats part-owned by the Chinese government. Aixtron has a facility in Sunnydale, California where it employs about 100 people and in Obamas 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 its 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 Chinas 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 its 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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