M&A

Silent partner

Unigroup keeps low profile over French tech buy

Ecosim-w

“We feel like cabbages in a field. We’ve no idea what sauce we’re going to get cooked and eaten with.” Such was the fearful prognosis of a production worker talking to French technology and business magazine L’Usine Nouvelle earlier this month.

The person in question is employed by Linxens, a manufacturer of microconnectors and antenna based in Guyancourt, just south of Paris.

China’s Tsinghua Unigroup purchased the company last summer and its workers worry that their jobs and Linxens’ technological knowhow will soon head east.

The €2.2 billion ($2.5 billion) acquisition marked a rare win for the China’s semiconductor giant, counting as its largest ever international M&A deal. Most of its attempts to make similar acquisitions in the US have been thwarted by regulators. This included an attempt to buy Micron for $23 billion in 2015 and a bid for a 15% stake in Western Digital for $3.8 billion a year later.

In 2017 three Taiwanese firms that specialise in chip testing and packaging had to back away from $2.6 billion in share sales to Unigroup because local regulators dragged their feet on approving the deals.

At least the Linxens acquisition went through, representing the fifth largest M&A transaction in France last year, according to Dealogic data. Mindful of previous problems, both buyer and seller tried to keep news of the takeover as low-key as possible, fearful that the publicity about potential technology transfer might prompt regulators to reject it.

Back in 2014 French finance minister Bruno Le Maire said that his government was happy to accept long-term investment from China as long as French assets were not “looted”. And in this particular case the French decided to let the Linxens bid pass on the grounds that the company makes the “passive”, non-strategic components of chips, not the full semiconductors.

The Americans didn’t have the chance to veto it either, because the group’s US operations were excluded from the takeover.

In a recent article Linxens chief executive Christophe Duverne said that Chinese ownership would help the company win more contracts from the government and banking sector. It already has one factory in Guangzhou and a testing and packaging plant in Suzhou, but it now plans to build a second factory in Tianjin to be closer to customers in nearby Beijing.

Linxens makes the connectors crucial for communication between smart cards and electronic readers, supporting applications such as contactless payment, transport passes and building access.

The company will be hoping to profit from a series of policy initiatives at governmental level. As Caijing points out, the Ministry of Communications is launching a new smart transport card, while the Ministry of Human Resources and Social Security is starting to issue smart social security cards.

On top of that there is the government’s plan to install RFID (radio frequency identification) chips in the windscreens of all the country’s cars. Linxens is one of the world’s biggest producers of RFID antennas, which use electromagnetic fields to identify and track tags attached to objects.

The Chinese government says it wants to tag cars so that it can monitor congestion and pollution, and as a way of preventing terrorists from using vehicles in bombings.

Beijing’s critics say that new applications like these are going to help the state track much more of its citizens’ daily lives. “The Chinese government has gone all out to create a real surveillance state. There’s social credit, and facial recognition, and internet and telecom monitoring. It’s part of this larger effort to create total information awareness in China for the government,” James Andrew Lewis, a senior vice president at the Centre for Strategic and International Studies, told The Verge.

Linxens has been spending more of its time reassuring its French workers that their jobs are safe, however. “We are moving from a financial shareholder (CVC) to an industrial one. We remain an autonomous company with our decisionmaking based in Europe,” its chief executive Duverne assured L’Usine Nouvelle.


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