With eye on China, Germany toughens rules for foreign buyouts

BERLIN: Germany was set to toughen rules on non-EU share purchases and acquisitions of its strategic companies, amid growing disquiet about takeovers by Chinese firms.

It plans to lower the threshold where reviews apply to foreign purchase offers of 10 per cent of companies, down from 25 per cent now.

Germany and other EU states have voiced growing concern in recent years as Chinese companies have bought up, or purchased controlling stakes in, high-tech firms, airports and harbours.

Chancellor Angela Merkel’s cabinet planned to approve the change to the Foreign Trade Regulation, and Economy Minister Peter Altmaier was then to give a statement at 1130 GMT.

The update would strengthen government powers to review and possibly block foreign purchases in companies that are crucial to Germany’s defence or “critical infrastructure”.

This would include military, IT security and power companies but also, for example, large food producers, reported the business daily Handelsblatt.

“The test criterion is whether an acquisition endangers the public order or security of the Federal Republic of Germany,” an economy ministry spokesman told AFP.

Alarm has grown in Germany about losing valuable knowhow since Chinese appliance giant Midea in mid-2016 took over German industrial robotics supplier Kuka.

In mid-2017 Germany tightened scrutiny of non-EU takeovers of strategic companies, doubling to four months the time for reviews, and broadening the range of sectors. In February, Germany raised no objections when Chinese billionaire Li Shufu bought a near 10-per cent stake in the MercedesBenz parent company Daimler.

However in July, the state took a minority stake in electricity transmission firm 50Hertz, citing national security reasons, to thwart Chinese investors from buying into it.

Germany has been discussing similar protective steps at the EU level with France and Italy.

“The aim is to be able to intervene nationally, in individual cases, against state-controlled or state-financed strategic direct investments,” said the economy ministry.

This could apply where the home country of the purchasing company financially supports a takeover bid at above-market prices or through political incentives.