Chinese acquisition of German semiconductor equipment manufacturer Axitron SE (Axitron SE) transaction, after the first approval of the German government, was recently rejected by the US CFIUS. Rare transaction review procedures have sparked public concern that Germany will raise the threshold for Chinese companies to invest. The latest news is that on November 18th, German local time, Axitron SE announced that it has received the results of the US Foreign Investment Committee (CFIUS) review of the acquisition. CFIUS believes that the transaction poses a potential hazard to US national security and has handed over the proposal to veto the transaction to the US President for approval. According to regulations, US President Barack Obama needs to make a decision to approve or veto the transaction within 15 days. CFIUS believes that there is no reasonable measure to mitigate the potential threat to the national security of the transaction based on the proposals currently submitted by the parties, so it is recommended that both parties abandon the entire transaction. However, the CFIUS proposal has not been approved by both parties to the transaction. Ai Siqiang said in the announcement that the buyer, China's Fujian Grand Chip Investment Fund (hereinafter referred to as Hongxin Investment) and the seller, Ai Siqiang, decided not to comply with CFIUS's recommendations. Ai Siqiang said that the two sides will actively participate in the exploration and negotiation of ways to alleviate the concerns of CFIUS and the US president on national security issues in order to promote the continuation of the transaction. However, Ai Siqiang also stressed that there is no guarantee as to whether the two parties can conduct further communication at the CFIUS and US presidential levels, or whether they can take other measures to promote the transaction. “The national security concerns from the US are not directly related to the German Ministry of Economics and Energy. The US regulatory decision does not constitute the legal basis for the German government to review transactions.†Hermann Meller, Senior Partner, Dacheng Law Firm's German Office, for Caixin The reporter pointed out. In other words, in the case of US regulators rejecting the transaction, the German government may still approve the transaction. But the obstruction from the United States will undoubtedly cast a shadow over the acquisition. “If the target company of a cross-border acquisition transaction involves a market in another country, then the transaction needs to be approved by other national regulators.†A market analyst familiar with the cross-border M&A transaction process stated, “If the US government does not approve the transaction. Then, the business of the target company in the US market will undoubtedly be affected, and the German government will also face pressure." Founded in Germany in 1983, Axon is the world's leading semiconductor equipment manufacturer. Since the international market share has been squeezed by US competitors, since 2012, Aisiqiang's revenue situation has continued to decline. At the end of last year, Ai Siqiang also lost its big customer in China, Sanan Optoelectronics Technology Co., Ltd., causing its share price to plummet 43% on the day of the announcement. In February of this year, Ai Siqiang, who was in trouble, announced the sale of shares. On May 23 this year, Ai Siqiang announced that it had reached an acquisition agreement with China Fujian Hongxin Investment Fund. Hongxin Investment acquired all of Aisin's ordinary outstanding shares at a price of 6 euros per share in cash. The acquisition was successfully approved by the Aisin Executive Committee and the Supervisory Board. On July 29, Hongxin Investment officially issued a tender offer document to Ai Siqiang. On October 21, the acquisition offer period ended, Hongxin Investment won 65% of its shares, and the total purchase price reached 676 million euros (about 5 billion yuan). On September 8, the transaction was approved by the German government. However, a notice from the German government on October 21 caused the original seemingly ordinary acquisition to suddenly change. The German Federal Ministry of Economics and Energy decided to withdraw the previously approved approval decision for the transaction and reopen the review process for the transaction. An official from the German Ministry of Economic Affairs told the media that the rejection of retrial transactions was related to national security factors, but did not give more information. Market analysts pointed out to Caixin reporter that the investment environment of the German government has always been loose, and this is not very rare after the approval of the acquisition. Some German media reported that the German government rejected the retrial transaction and was intervened by US intelligence agencies. There is no such thing. In addition to the Ai Siqiang acquisition, in early October, Chinese LED chip maker Sanan Optoelectronics confirmed that it is in the process of purchasing German lighting equipment manufacturer OSRAM. According to German media, the acquisition also caused the German government and The resistance of trade unions. Some analysts believe that since the beginning of last year, Chinese companies have been rushing to Germany, which has triggered German concerns about technology outflows. The German government is tightening its review policy on acquisitions by Chinese companies. Zhang Kai, director of China M&A and managing partner of Weikai Law Firm, told Caixin reporter that the German government’s review of foreign investors’ mergers and acquisitions of German companies mainly focuses on two aspects: one is the anti-monopoly review of mergers and acquisitions, and the other is from the state. Conduct security reviews from the perspective of safety and public order. "Based on past experience, China's mergers and acquisitions of German enterprises, as long as they are not in the special industries defined by the German government, are generally procedural issues, at least this is the past practice." Zhang Wei believes that the recent acquisition of acquisitions by Chinese companies in Germany is still a case and has not yet been finalized. Whether it will cause the German government to introduce a more rigorous review mechanism, and even legislative changes, remains to be seen. “But in any case, the outcome of the case may have an impact on future Sino-German mergers and acquisitions,†he said. Dacheng Law Firm lawyer Hermann Meller told Caixin reporter that according to the process, the German government should give the approval result in December this year or January next year after restarting the approval process of Ai Siqiang. "Based on the information I can get now, I don't see any reason why the government should stop the acquisition," he said. However, the results of the US CFIUS ruling will undoubtedly put pressure on the German government. “In the case of CFIUS vetoing transactions, it has rarely been seen in the past that transactions can still be reached,†said market analysts. Also this year, due to CFIUS opposition, Dutch technology company Philips (Philips) terminated its $3.3 billion deal to sell its US-based lighting company, Lumileds, to a Chinese-backed private equity fund. The attitude of the German government in the acquisition of Chinese enterprises has affected the recent Sino-German relations. From November 1st to 5th, German Deputy Prime Minister and Minister of Economy Sigmar Gabriel visited China during the visit. A meeting with the Chinese Minister of Commerce Gao Hucheng was cancelled. Investment problems and "cold". In addition, on November 16, the US-China Economic and Security Review Commission recommended that the US Congress ban the acquisition of Chinese state-owned enterprises by amending the regulations on the US Foreign Investment Committee (CFIUS). Perkins Engine Diesel Generator
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