The Acquisition of Linxens

As part of our ongoing research into Chinese acquisitions in Europe, Datenna decided to highlight and research remarkable cases. This case considers the acquisition of the French semiconductor company Linxens.

Short read

  • France based Linxens sold for €2200 million in 2018
  • Chip security technology acquired by Chinese investors
  • Ultimate investor is Tsinghua University (Ministry of Education)
  • New factory in Tianjin, China to become largest facility worldwide

The sale of Linxens

In 2015 Linxens was sold to CVC Capital Partners, a private-equity investor. In 2018 it was subsequently sold to Ziguang Liansheng who acquired the shares in Linxens for a total of €2200 million. 

Ziguang Lianshen was newly established in May 2018 with the specific purpose of acquiring Linxens. Ziguang Liansheng is ultimately controlled by the Tsinghua University. 

Ziguang Liansheng - part of Tsinghua Unigroup

There are 5 shareholders in the newly established Ziguang Liansheng. The largest is Tibet Ziguang Shicang Investment with 75% of the shares. This investment company is ultimately owned by the Tsinghua University (via Beijing Ziguang Capital Management, Ziguang Capital and Tsinghua Holdings). The ultimate controller of the Tsinghua University is the Ministry of Education. 

The other shareholders all own smaller stakes: Zijin Haikuo (8,3%), Zijin Haiyue (8,3%), Hongfeng (5,6%), Xinhua (2,8%). The controlling shareholder of Zijin Haikuo and Zijin Haiyue is Weitao electronics. This company is majority owned by Beijing Jiankun Investment Group, which is also the second shareholder (49%) in Ziguang Group. Beijing Jiankun is (70%) owned by Zhao Weiguo. He is also chief executive of Tsingua Holdings, and legal representative of Ziguang Group as well as Beijing Ziguang Capital Management.

The next shareholder, Hongfeng Capital, is owned by Oceanwide Investment and is ultimately controlled by three individuals. The last shareholder (Xinhua Equity Investment) is owned by the Suzhou Industrial Park (SIP) Asset Management. Their largest shareholder (49,5%) is Xinxin Financial Leasing. This company serves under the direction of the state-owned National IC Fund (The Big Fund), which has been involved in many semiconductor acquisitions in Europe (for example Anteryon in The Netherlands). Interestingly, the second shareholder in SIP Asset Management (49%) is controlled again by the Ziguang Group (which is part of Tsinghua Holding).

What does Linxens do?

Headquartered in France and founded in 1979, Linxens is a world-class specialist in R&D, design and manufacturing of micro-connectors. Linxens is the largest producer worldwide of smartcard devices and has over 3.500 employees. Its products are used in a wide range of applications by smartcard manufacturers and chipmakers. 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 offers a complete range of RFID inlays and antennas, as well as packaging and testing. Linxens is a leading technology provider for 80 percent of the world’s population, covering sectors that include telecommunications, finance, transportation, hotels, e-governance, and Internet of Things (IoT).

New factory in China

In September 2019 – one year after the acquisition – Linxens announced the construction of a massive factory and research center in Tianjin, China. The factory is expected to be completed in 2021 and requires an investment of about 2.1 billion rmb (260 million euro). It will become Linxens’ largest production facility worldwide with state-of-the-art technological and production capabilities that will utilize the company’s global R&D expertise and industry knowledge.

The plant will become part of Unigroup’s chip and cloud production base. The base in Tianjin will be comprised of the Linxens’ plant, Unicloud’s headquarters and an incubation center for the chip and cloud businesses of Tsinghua Unigroup.

Mr. Shan Zefeng, Party Secretary of Tianjin Binhai High-Tech Zone, commented, “Linxens’ construction of a world-class production facility for smart chip components will provide momentum for the city to become a major technology hub for the global chip and cloud sector.”

Decision center: Europe or China

When Linxens was acquired by the Chinese investors the main concern of employees was whether they would be able to keep their jobs. Now new concerns arise. With the recent launch of the new facility and research center in Tianjin, China it seems the Chinese state-controlled investors are increasing their influence on the company. President and CEO Christophe Duverne however stated in a recent interview that Linxens will remain an autonomous company with the decision-making based in Europe.

Large acquistions by Chinese investors have raised public disapproval in recent years. To reduce the risk of such public turmoil influencing this deal, it was supposedly kept silent for over a month after it was signed while awaiting approval from regulators (Reuters). 

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 US CFIUS didn’t have the chance to block the acquisition, because the group’s US operations were excluded from the takeover.

We are moving from a financial shareholder to an industrial shareholder, present in particular in semiconductors and network equipment. We remain an autonomous company with our decision-making based in Europe.

Reshuffle of shares

During the acquisition in 2018 a complex scheme of investment vehicles was used. To acquire Linxens, the shares of its holding company (Lully) were acquired through a string of investment vehicles in China, Hong Kong, France, and Luxembourg (see simplified scheme on the left).

On top of this complexity, Tsinghua Unigroup wanted to re-organize its subsidiaries in June 2019. Linxens hereby would became part of the stock-listed Unigroup Guoxin Microelectronics. Unigroup Guoxin Microelectronics was going to issue new shares to finance the acquisition. The new shares would then be bought by the original consortium of investors that acquired Linxens, thereby effectively organizing a share swap. In June 2020 the China Securities Regulatory Commission however rejected the proposal because of flawed asset ownership and excessive goodwill value for Linxens (Yicai Global). It is not clear yet if the share swap is postponed or cancelled.

Unigroup Guoxin Microelectronics is headquartered in Tangshan City, Hebei Province and is a listed company on the Shenzhen Stock Exchange of China. They mainly produce telecom smart card chips, memory chips, and special integrated circuits. Through its subsidiaries it is also engaged in the development, production and sales of piezoelectric quartz crystal components.

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China-EU FDI Radar

This case study is part of our ongoing research initiative investigating Chinese state-influenced acquisitions in the EU. The aim is to provide greater transparency on Chinese investments in Europe and the links with the Chinese government. It currently covers the period from 2010 to the present. Our findings are displayed on an interactive map.

The map utilizes our CUBO database to establish the degree of governmental influence in the acquiring company. It will be continuously updated.