The planned acquisition of 🇱🇺 Circuit Foil Luxembourg by Chinese EV battery parts supplier 🇨🇳 Jiujiang Defu Technology (德福科技) has collapsed after Luxembourg imposed extra restrictions on the deal. Defu said in a filing to the Shenzhen Stock Exchange on Jan 11 evening that it has decided to abandon the 100% acquisition of Circuit Foil Luxembourg, a manufacturer of high-end electrolytic copper foil used in various tech products, including batteries for electric vehicles, smartphones and semiconductors. The deal was agreed last July between Defu and Volta Energy Solutions, a Luxembourg unit of Seoul-listed Solus Advanced Materials that fully owns Circuit Foil. The transaction was priced at €174 million (US$204 million). In the Jan 11 filing, the Jiangxi province-based company said it had received a notice from Luxembourg's Ministry of the Economy on Jan 9, detailing the results of a compulsory investment review for foreign investors. The notice said Defu would only be allowed to acquire a minority stake and was denied from taking a stake that would enable it to veto corporate decisions. In addition, restrictions would be imposed on its management of areas such as corporate governance, trade secrets and intellectual property. As the tentative deadline for the share purchase agreement passed on Jan 9, both parties concluded that completing the deal would be "impossible" under the regulatory restrictions imposed by authorities in Luxembourg, according to the statement. On Jan 10, the two parties agreed to terminate the deal on "friendly" terms. Volta Energy is to refund the 10% deposit already paid by Defu. Regulatory procedures on the Chinese side had already been completed, with Defu establishing a fully-owned subsidiary, Kwaxkaro Luxembourg, as part of the agreement. According to a spokesperson from Luxembourg's economy ministry, the decision on Defu's proposed acquisition of Circuit Foil was a result of applying the national screening mechanism on foreign direct investments in accordance with EU regulations adopted since Sep 2023. The mechanism aims to "protect sectors deemed critical" for both the country and the EU as a whole, and in this context, the Defu case was reviewed and given "conditional authorization." Defu stressed that the failed acquisition would not affect its ordinary production, operations or financial position, and that it would continue to "accelerate the development of [its] high-end electronic circuit copper foil business." In a separate filing on Jan 11, Defu said it has agreed to acquire a majority stake in domestic copper foil producer Huiru Technology, gaining access to annual production capacity of 20,000 metric tons of electrolytic copper foil. The company said the acquisition aligns with its corporate strategy, addressing the issue of its own production capacity "reaching saturation point." The price of the deal has not been determined. In its July announcement, Defu described the Luxembourg deal as carrying "significant strategic importance." The acquisition was intended to give the company control of high-end copper foil products, for which China relies heavily on imports. The company said the transaction was not only aimed at addressing trade imbalances in the sector, but also at strengthening domestic supply chain security and tackling the country's tech "chokepoints."