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9 December 2016

China's Grand Chip abandons acquisition of Aixtron

Grand Chip Investment GmbH (GCI, a German limited liability company set up as a special-purpose investment vehicle) says that its voluntary public takeover offer announced on 29 July to acquire all the shares of deposition equipment maker Aixtron SE of Herzogenrath, Germany has lapsed due to the non-fulfillment of an offer condition.

Aixtron agreed in late May to be taken over by GCI. GCI's China-based parent firm Fujian Grand Chip Investment Fund LP is held 51% by Chinese businessman & private investor Zhendong Liu and 49% by Xiamen Bohao Investment Ltd (an investment entity indirectly controlled by Chinese private investors Zhongyao Wang and Wanming Huang). Fujian Grand Chip (FGC) hence said that it would launch a voluntary public takeover offer to acquire all of the outstanding ordinary shares of Aixtron SE, including all ordinary shares represented by Aixtron ADS (American depositary shares). Shareholders were offered €6 per ordinary share, valuing Aixtron's equity (including net cash) at about €670m and reflecting a 50.7% premium to the three-month volume weighted average share price prior to the announcement.

However, on 21 October the German Federal Ministry of Economics and Energy withdrew the Clearance Certificate issued on 8 September to FGC and reopened review proceedings in connection with the acquisition, citing that Aixtron's know-how comprises security-related technologies (in particular for the defense sector) that could be revealed through the acquisition.

Including its subsidiary Aixtron Inc in California, Aixtron's US business in 2015 comprised nearly 20% of the company's entire staff and accounted for more than 20% of global sales. Hence, following advice from the Committee on Foreign Investment in the United States (CFIUS), which is chaired by the US Department of the Treasury, on 2 December US President Barack Obama issued an executive order prohibiting the acquisition of Aixtron's US business by GCI (some of whose investors have Chinese government ownership, it is alleged).

CFIUS and the President assessed that the transaction posed a risk to the USA's national security that could not be resolved through mitigation. The risk related to the "military applications of the overall technical body of knowledge and experience of Aixtron… and the contribution of Aixtron's US business to that body of knowledge and experience". Aixtron makes metal-organic chemical vapor deposition (MOCVD) systems for growing semiconductors including gallium nitride (GaN), used in the manufacturing of not only light-emitting diodes (LEDs) but also, it is said, defense electronics. Obama's order hence directed the purchasers and Aixtron to permanently abandon the proposed acquisition within 30 days (unless the date was extended by CFIUS for a period of up to 90 days).

In response to Obama's presidential order, on 2 December China's Foreign Ministry spokesman Geng Shuang commented regarding the acquisition deal: "Since it is a normal commercial activity, it will be carried out following the rule of markets and business," according to a Reuters report. "We hope the external parties will not over-interpret that or make any political intervention," he added.

Also, on 3 December, Aixtron noted that Obama's presidential order was limited to the US business and did not prohibit the acquisition of Aixtron shares and ADSs by GCI.

Now, Aixtron says that, as a consequence of Obama's order, the offer's condition - for clearance of the transaction by either CFIUS or the US President - has not been fulfilled. The public takeover process initiated by GCI has hence come to end, says Fujian Grand Chip.

According to Reuters, at the time of Obama's order Aixtron said that, in response, action would need to be taken to re-balance costs and income, possibly including cutting jobs. At the end of third-quarter 2016, Aixtron had 713 staff worldwide (including 136 in the USA).

See related items:

Obama bars Fujian Grand Chip's takeover of Aixtron's US business

CFIUS advises US President to prohibit Grand Chip's takeover of Aixtron

Aixtron returns to positive free cash flow in Q3, boosted by sales of AIX R6 system inventory

Germany withdraws clearance of Grand Chip Investment's takeover of Aixtron

Aixtron agrees €670m takeover by Fujian Grand Chip Investment Fund

See: Aixtron Company Profile

Tags: Aixtron MOCVD

Visit: www.whitehouse.gov/the-press-office/2016/12/02/presidential-order

Visit: www.aixtron.com

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