The aircraft parts supplier Cotesa likes to boast that without its precision silicon and plastic components, Airbus planes would not fly. That’s certainly true, but its origins are somewhat less glamorous. For many years, it specialized in flip-down changing tables and cistern covers for airplane bathrooms. “Toilets – that’s where it all began, 15 years ago,” says founder and CEO Jörg Hüsken.
But it’s another sort of stink that thrust the mid-size firm into the limelight this year: Germany’s troubled commercial relations with China. Last September, China’s Advanced Technology & Materials – a subsidiary of the state-owned China Iron & Steel Research Institute Group – made a more than €100 million ($118 million) move for a 75 percent stake in Cotesa.
But before the deal could go through, Germany’s increasingly rattled economics ministry intervened and set about a thorough investigation into its national security implications. After months of frustration and delay, it finally gave the green light. The deal has now gone through, Cotesa confirmed to Handelsblatt this week.
“The Chinese understand us. They are a strategic investor with a long-term outlook.”
But the painful process has left a sour taste at Cotesa and other mid-size German firms looking for investors. The investigation would simply not have happened if the bid had come from a Norwegian or American investor, says Mr. Hüsken. Over the past two years, Chinese acquisitions of German technology companies have become a political hot potato.
The problems started in 2016, mainly as a result of the €4.5 billion takeover of robotics maker Kuka by Chinese electrical appliance manufacturer Midea. This led to fears that China was snapping up key German companies with a view to acquiring technological knowhow and intellectual property. The prospect scared the German government, which is keen to protect the many German businesses that rely on their expertise to remain competitive.
Later in 2016, a Chinese bid to buy German chipmaker Aixtron was blocked on security concerns raised by the United States. In the aftermath, both Germany and the European Union announced enhanced powers to investigate and block overseas bids for technology companies.
In theory, takeover attempts from any nation can be investigated by regulators. But in practice, this is all about China, meaning that even relatively innocuous businesses like Mr. Hüsken’s can become a focus for investigation.
The problem for him was that no European investor wanted to put the necessary funds into the company, and AT&M was a good match. “The Chinese understand us. For the first time, we have a strategic investor with a long-term outlook,” he says.
Now that the deal has been approved, Cotesa is planning a major expansion. Already a supplier to Airbus and Boeing, it wants to deliver parts to Chinese aircraft manufacturer Comac. “Within 10 years, we’ll increase revenues by a factor of 10,” says Mr. Hüsken. The company currently turns over almost €70 million with a workforce of around 750 in Mittweida, Saxony.
The new investors also mean business. “There’ll be a new factory in China,” says Zhang Jinhua of the QFAT investment fund, which arranged the deal along with ICP, a Beijing-based private equity investor. However, no changes are planned to the structure of the German firm, and the current management team will remain in place.
This is not the first time AT&M has attempted to secure a foothold in Germany. More than 10 years ago, the company launched a large-scale joint venture with Odersun, a manufacturer of solar panel technologies. But Odersun’s expansion into China proved a failure and the company filed for bankruptcy in 2012.
AT&M is confident that Cotesa will be different. Whereas the solar power industry suffered from severe overcapacity, it says, aircraft manufacturing is a well-developed market. But if it and other companies looking to secure Chinese backing are to be successful, the German government will have to ease up on its checks, Mr. Hüsken believes. “This long delay for the ministry to make up its mind has already cost us €3 to €5 million in business,” he says.
Stephan Scheuer is co-head of Handelsblatt’s feature and people’s desk. He was previously China correspondent in Beijing. To contact the author: email@example.com