Security Concerns : Monsanto Gets OK to Sell Silicon Unit to Germans

A high-level U.S. review board recommended Monday that the Bush Administration not try to block plans by Monsanto to sell a silicon manufacturing subsidiary in Palo Alto to a West German company, despite earlier concerns that it could pose some national security risks.

U.S. officials said the recommendation came after the would-be buyer provided written assurances that it would keep the factories and research and development facilities inside the United States.

The firm, known as the Monsanto Electronic Materials Co., is the nation’s last remaining major producer of silicon wafers, the materials from which the semiconductors used in computers and other vital electronic products are made.

Monsanto has said it plans to sell the company to a West German firm, Huels AG, a unit of West Germany’s huge Veba AG conglomerate. Three potential U.S. bidders, including one representing some employees in Palo Alto, also had expressed interest in buying the plant.

Case Goes to Bush

Although most of the agencies on the high-level panel had favored allowing the sale to go through unimpeded, the Defense Department had raised concerns that the United States might lose control over the plant--particularly its manufacturing and research and development facilities.

But Defense Department officials withdrew their objections Monday, and the recommendation that the United States not block the sale now is unanimous. The case goes to President Bush, who is considered certain to go along with the recommendation. Bush has 15 days to decide.

The move to review the proposed sale of the Monsanto firm came under a provision of the recently enacted Omnibus Trade Act, which made it easier for outsiders--including the affected firm’s competitors--to challenge the sale of a domestic corporation to foreign buyers.

The government has been under increasing pressure from Congress to become “tougher” about foreign acquisition of U.S. companies, particularly in the face of the sharply lower dollar, which makes U.S. firms attractive to overseas investors.

Rep. James J. Florio (D-N.J.), author of the trade act provision and chairman of a House Energy and Commerce subcommittee, has vowed to conduct hearings on the foreign acquisition issue.

Administration officials say they see nothing wrong per se with most foreign investment.

Production Fears Cited

The high-level government panel that conducted the review is known as the Committee on Foreign Investment in the United States and is made up of sub-Cabinet-level officials from about half a dozen agencies and departments, including Treasury, Defense, Commerce and State.

The review came after competing bidders had suggested that if Huels bought the firm it would close a Monsanto plant in Missouri and only operate a Spartanburg, S.C., facility, reducing America’s ability to produce silicon. Monsanto officials denied that charge.

The committee met informally to discuss the case a week ago but delayed any decision until Monday, after Monsanto and Huels had had time to respond to the Defense Department’s objections. Had the United States sought to block the move, another bidder would have stepped in. A purchase price on the acquisition has not been disclosed.