The Federal Ministry of Economics is examining the planned takeover of the company Vacuum Schmelze (VAC) from Hanau in Hesse by Energy Fuels. The US company wants to buy VAC for $1.9 billion from Ara Partners, a US investment company.
Ara Partners acquired the German magnet manufacturer in 2023, and it has been owned by various investment companies based in the USA since 2005.
With Energy Fuels, VAC would go to a company that itself extracts raw materials and operates its own supply chain - the Federal Ministry of Economics is now investigating whether the deal affects German security interests.
A report from the ministry for the Economic Committee of the Bundestag, which met on Wednesday, says: An investment review process would be carried out in accordance with the Foreign Trade Act and the Foreign Trade Ordinance with the participation of the departments concerned. The report is available to Handelsblatt.
This means: “It will be intensively examined whether and to what extent the acquisition is likely to affect German or European security interests - especially with regard to security of supply,” writes the ministry. If such dangers were identified, “the Federal Ministry of Economics will take the measures necessary to effectively counter the dangers”.
VAC employs around 4,000 people. In addition to its headquarters in Hanau, the company operates production sites in Slovakia, Finland, Malaysia and China. The focus is on the development, production and marketing of magnetic materials.
According to its own information, VAC is “the world’s leading manufacturer of advanced magnetic solutions, rare earth permanent magnets and inductive components that contribute significantly to the decarbonization of our planet.”
Permanent magnets are considered a key technology for the energy transition, for the transformation of industry and for digitalization. They are essential for building electric cars, wind turbines, cooling systems, industrial robots, fighter jets, drones and artificial intelligence (AI) data centers.
Vacuum Schmelze was founded more than 100 years ago and claims to have held patents for more than 40 years. In the past ten years, VAC has produced more than a billion permanent magnets. In June, the US mining company Energy Fuels announced that it would take over the traditional company from Hanau from the US investment company Ara Partners for the equivalent of around 1.9 billion US dollars. Ara Partners wants to retain a 20 percent stake.
According to media reports, VAC will retain its brand after the takeover is completed and will continue to be managed from Hanau, but will be fully integrated into Energy Fuels in the future.
With the takeover of VAC, Energy Fuels now wants to build a continuous production chain outside of China - from the extraction of rare earths to the finished magnet.
The takeover is seen as part of the US and its allies' strategy to free themselves from heavy dependence on China. China now controls the majority of the global supply chain for rare earths - from the processing of raw materials to the production of magnets. This is increasingly seen as a security policy risk.
There has been speculation about the investment review for weeks. The Federal Ministry of Economics had not yet confirmed it.
Insiders report that it is unlikely that the federal government will prohibit the takeover. Rather, it is likely to demand concessions to ensure that the Hanau plant remains central to the business. However, the requirements imposed by the ministry are usually not disclosed. This is increasingly being criticized.
The Federal Ministry of Economics recently imposed conditions on the takeover of the listed German software provider PSI by the US financial investor Warburg Pincus. However, details of these requirements remained secret. The Federal Ministry of Economics referred to “constitutionally protected trade secrets” of the companies involved.
The secrecy in the PSI case is “completely out of the question,” said Michael Kunert from the Investor Protection Association. It undermines trust in the government's actions. Shareholders in particular have a right to information. He also fears for the future of PSI in its current form, said Kunert.
There have recently been cases in which the federal government completely banned investments by foreign companies. Just a few days ago, the federal government stopped the takeover of the logistics company Zippel by the Chinese state shipping company Cosco. The reason was security concerns: “The acquisition would have deepened dependencies and endangered the resilience of supply chains in Germany and the EU,” said the Federal Ministry of Economics.
