Japanese Firm Drops Offer for U.S. Tool Maker : High technology: Fear of congressional opposition ended the bid for the supplier of nuclear weapons gear.

Retreating in the face of intensifying congressional opposition to Japanese takeovers of American technology companies, a Japanese robot vendor on Tuesday said it backed out of an agreement to buy 40% of a Connecticut machine tool company that supplies equipment for nuclear weapons production.

Although Fanuc Ltd. said only that delays in gaining government approval had led it to abandon the transaction, the move was also seen as an effort to head off a congressional drive to tighten laws governing foreign investment in strategically important industries.

It marked at least the third time in recent years that a Japanese company has backed away from a sensitive technology acquisition rather than weather the political fallout.

Fanuc had agreed last year to invest $10 million in family-owned Moore Special Tool Co., and the deal could eventually have given a Fanuc a controlling interest in the firm.

Because Moore supplies precision milling equipment to the Department of Energy’s nuclear weapons programs--and because advanced machine tools are considered by many to be crucial to the country’s technology base--the proposed transaction became a lightning rod for congressional criticism of the Bush Administration’s laissez-faire policy on foreign investment.

Foreign buyouts are reviewed by the interagency Committee on Foreign Investment in the United States (CFIUS), which then makes non-binding recommendations to the President. Under the Exon-Florio provision of the Defense Production Act, which has not yet been reauthorized, acquisitions can be blocked by the President on national security grounds, but that authority has been exercised only once in the last three years.

Last month, a group of congressmen led by Rep. Mel Levine (D-Santa Monica) urged President Bush to block the Moore-Fanuc deal even though CFIUS had recommended approval. But because the Defense Production Act had lapsed, Bush was not required to act, and there was apparently enough opposition within the Administration to prevent him from granting his seal of approval.

Seth O. C. Brody, an attorney representing Moore, said the company had been advised not to go ahead with the deal without such approval, because the law is expected to be reauthorized soon and will apply retroactively. Fanuc attorney Evan Burlack cited the possibility of a long delay in gaining approval as a key reason behind Fanuc’s withdrawal.

The company’s decision came just a week before a subcommittee of the House Energy and Commerce Committee was scheduled to hold hearings on the deal as part of its oversight of Exon-Florio. And Levine is seeking an amendment to the Defense Production Act that will make it easier for the President to block foreign takeovers on national security grounds.

Levine and other congressmen emphasized that they do not want to see Moore go out of business as a result of losing the Fanuc investment, and some are supporting a loan-guarantee fund and other measures that would help troubled American technology companies remain in domestic hands.

Brody said Moore, which has sales of between $30 million and $40 million a year, was not in immediate danger, and that it remained open to proposals but was not seeking another buyer.