EU plans measures to block foreign takeovers of strategic firms

Fri Mar 10, 2017 9:20am EST
 
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By Francesco Guarascio

BRUSSELS (Reuters) - The European Union plans measures to block "politically-motivated" foreign investment, after Germany, France and Italy asked it to act against takeovers in sectors that could harm Europe's strategic interests.

The proposal could give the EU - which can already block takeovers on antitrust grounds - power to scrutinize "investments in the EU of strategic importance both from an economic and security perspective".

That would include defense, transport infrastructure and critical and cutting-edge technologies and could be extended to deals that put at risk a vaguely defined "economic prosperity", according to the proposal from the European Commission's industry department seen by Reuters.

The paper makes several references to China, citing, as one hypothetical example of an undesirable deal, a company receiving funds from the Chinese government to enable it to buy a European company to make a "strategic penetration of the EU market".

Germany has been making protectionist noises after a spate of Chinese takeovers of its technology companies. Home appliance maker Midea's 000333.SZ acquisition of robot-maker Kuka (KU2G.DE: Quote) was just one of the Chinese deals last year with a total worth of more than $10 billion, about 40 times as much as in 2015, according to Thomson Reuters data.

Some EU countries have their own rules to protect strategic firms, but this would be the first at the EU level and would go beyond the usual scope of such measures which are usually related to national security.

Under the proposal, the EU could block takeovers by a company whose motivation is "just for the purpose of disposing its overcapacity" - which could include sectors such as steel where Europe accuses China of dumping under-priced goods.

The blocking mechanism could also apply to takeovers of EU companies by an EU-based subsidiary of a foreign firm, or even in cases of "infiltration of the management with individuals from non-EU countries" who could access data and technology, the paper said.   Continued...

 
FILE PHOTO: European Commission President Jean-Claude Juncker, left and Chinese President Xi Jinping shake hands before a meeting held at the Diaoyutai State Guesthouse in Beijing, China, Tuesday, July 12, 2016. REUTERS/Ng Han Guan/File Photo