Berlin initially approved of the sale on September 8, but had now withdrawn the clearance certificate for Fujian Grand Chip Investment Fund (FGC), Aixtron said in a statement released Monday.

Aixtron also said that the Economics Ministry was planning to reopen a review of the $728-million (670-million-euro) takeover on grounds that were not immediately clear to the German chip equipment maker. 

German Deputy Economy Minister Matthias Machnig said Berlin's decision to withdraw its approval came after new security-related information emerged.

"The government received previously unknown security-related information," Machnig told German newspaper "Die Welt," adding that the ministry evaluated the information in question together with other departments.

Shares in Aixtron, which makes machines that are key for the production of red, blue, green and white light emitting diodes (LEDs), were down by about 7 percent in morning trading Monday, plunging well below FGC's offer price of 6 euros per share in cash.

Policy U-turn

The move must be seen as a change in German economic policy, which has so far been rather takeover-friendly, but which now seems to re-consider positions when it comes to key industries.

German Economy Minister Sigmar Gabriel called in June for a Europe-wide safeguard clause which could stop foreign takeovers of firms whose technology is deemed strategic for the future economic success of the region.

Rising Chinese interest in German companies is reflected by a number of high-profile takeovers recently, including among others the acquisition of German industrial robot maker Kuka by Chinese household appliance manufacturer Midea for 4.5 billion euros. Chinese chipmaker Sanan Optoelectronics has also said it had been in contact with lighting group Osram about a potential acquisition or cooperation deal.

In the case of Aixtron, the company's executives have backed the offer of FCG which expired last Friday. The German company has been trying to return to profit in the face of overcapacity and regain leadership of the global market for LED chip-making equipment from US rival Veeco Instruments.

Aixtron executives have warned that the company's only alternatives to the deal with FGC would be to keep investing its scant funds in new technology in hopes of a recovery of demand, or to shrink its business and its workforce.

"It is unclear whether the German Ministry has new insights which might have led to the reopening of the review," DZ Bank analyst Harald Schnitzer told the news agency Reuters.

FGC, which is controlled by businessman Zhendong Liu, wanted to buy Aixtron through its investment vehicle and said it had been offered 65 percent of the German company by Friday.

uhe/jd (Reuters, dpa)