Germany blocked Chinese metals takeover on military concerns - sources

By Zandi Shabalala and Tom Daly

LONDON/BEIJING (Reuters) - The German government rejected a bid by China's Vital Materials Co to buy PPM Pure Metals last month due to concerns about the target company's sales to the German military, two sources with knowledge of the matter said.

PPM, which was part of Paris-listed Recylex SA <RXPA.PA> and made high-purity minor metals such as antimony, used in semiconductors and germanium used in infrared detectors, stopped production at the end of July because of financial problems.

Vital Materials, the world's top minor metals producer, put together a bid to save the firm but the German defence ministry did not want it to be acquired by a Chinese company because PPM sold some products to the military, one of the sources said.

"The final result is that PPM's operations have shut down," said the source, who declined to be identified due to the sensitivity of the matter.

In April, Germany agreed to tighten rules to protect domestic firms from unwanted takeovers by companies from non-European Union countries.

Berlin has blocked a handful of Chinese deals in Germany, including a proposed takeover https://tinyurl.com/yxqlchoc of German toolmaker Leifeld by Yantai Taihai a bid https://tinyurl.com/yyp2rb3b by China's State Grid for a stake in power grid operator 50Hertz in 2018.

A Vital Materials spokesman confirmed the company made an offer for PPM but said a deal was not reached. He declined to give further details.

Recylex and Germany's Federal Ministry of Defence did not respond to requests for comment. The Federal Ministry for Economic Affairs and Energy declined to comment.

The closure of PPM meant the loss of around 85 jobs at the company based in the town of Langelsheim, in Germany's Lower Saxony region.

PPM had been open to the takeover by Guangzhou-based Vital Materials before the German government rejected the move, the second source said, also requesting anonymity.

PPM has been loss-making since 2012, with the exception of a small profit in 2018, exchange filings show.

Vital Materials was the big winner in a series of online auctions in 2019 and early this year that sold off minor metal inventories formerly held by China's Fanya Metal Exchange, including indium and germanium.

(Additional reporting by Sabine Siebold, Michael Nienaber and Christian Kraemer in Berlin; editing by Shivani Singh and David Evans)