Germany's Aixtron says U.S. opposes China deal on security grounds

The headquarters of German chip equipment maker Aixtron SE is pictured in Herzogenrath near the western German city of Aachen, October 25, 2016. REUTERS/Wolfgang Rattay

(Reuters) - Germany's Aixtron Se AIXGn.DE said the Committee on Foreign Investment in the United States (CFIUS) informed the company it would recommend that its pending takeover by China's Fujian Grand Chip Investment Fund (FGC) be blocked.

Aixtron said the committee, which reviews deals that may be national security risks, told the chip equipment makers it plans to recommend to the U.S. president that the deal be blocked due to security concerns and advised the companies to drop the deal.

Aixtron said in a statement the companies decided not to follow CFIUS recommendation. Neither company was available for further comment.

Experts say CFIUS, the task force headed by the Treasury Department, rarely kills a deal outright but will inform lawyers handling the deal of its opposition, and the companies usually drop the transaction.

The only deal CFIUS had formally stopped was in 2012, when it obtained a presidential order ordering a small Chinese company, Ralls Corp, to sell a wind farm in Oregon because the farm was near a training site used to test unmanned drones.

German newspaper Handelsblatt had reported last month that U.S. intelligence services had warned Germany on the proposed Chinese takeover of Aixtron, adding that the deal could give Beijing access to technology that could be used for military purposes.

The German government had also withdrawn its approval for the deal following security concerns.

(This story corrects to remove extraneous word from first paragraph.)

Reporting by Parikshit Mishra in Bengaluru and Diane Bartz in Washington and So Young Kim in New York; Editing by David Gregorio