A £1bn-plus Chinese takeover of Doncasters Group, one of the UK's oldest engineering firms, has been called off amid US security concerns over the company's defence operations.
DIC's decision - reached after months of talks - is understood to have been motivated at least in part because of indications from US officials that they would not approve the takeover, City sources said on Wednesday
Although its defence business, which makes missile fins and components for weapons launch systems, accounts for less than 5% of total revenues, Doncasters is said to have found separating the division from its wider engineering business fraught with difficulty.
Midlands-based Doncasters specialises in working with metals and alloys that are difficult to shape, and employs more than 5,000 people in the UK, US and elsewhere.
The company was founded in 1778 when Daniel Doncaster set up a hand-tool casting business in Sheffield, and counts Boeing (NYSE: BA - news) and Rolls Royce (LSE: RR.L - news) among the customers of its broader aerospace business.
In a memo to staff sent in the last few days and seen by Sky News, Doncasters said the sale process had been terminated but did not name Xinwei as the prospective buyer, nor the reasons for calling off the talks.
"The DIC Board has voted unanimously to retain full ownership of Doncasters and has closed any ongoing discussions with potential buyers.
"While considering a sale of Doncasters, DIC has discussed the company's progress and potential with its financial partners who agree that the business is in a healthy position with significant growth potential."
The memo said that DIC's own investors, whose identities are undisclosed, had "expressed confidence in the performance of Doncasters and are supportive of extending DIC's credit agreements".
It acknowledged that pursuing the company's existing strategy under DIC's ownership would "best allow Doncasters to continue to serve its customers' best interests without disruption", adding that DIC had "no plans to re-enter into any sale process for several years".
In the UK, Greg Clark, the Business Secretary, ordered a national security probe this week into the takeover of Sepura - which makes communications equipment for the emergency services - by Hytera Communications, a Chinese company.
Ministers previously intervened to prevent a Chinese takeover of Sheffield Forgemasters, which makes parts for the UK's fleet of nuclear submarines.
The Chinese tycoon behind Xinwei, Wang Jing, was once ranked among the world's richest men.
His interest in Doncasters came ahead of proposals, due to be published shortly, for tighter control of foreign investment in the UK's critical national infrastructure.
A recently published industrial strategy green paper did not address the issue, which has drawn the attention of Theresa May and her officials.
In 2015, the British manufacturer made underlying pre-tax profit of about £120m, sharply lower than the previous year.