Ministers seek to end ‘back door’ foreign takeovers with new security bill | Mergers and Acquisitions


Ministers are seeking sweeping powers to block takeovers by Chinese and foreign companies on national security grounds in the biggest upheaval in UK industrial intervention policy in nearly two decades.

A national security and investment bill is due for release on Wednesday, which would also allow ministers to retrospectively suspend acquisitions at any time during the five years after the deal is concluded.

But Chinese conservative backbenchers have said they want to study the bill carefully and consider amendments to help prevent takeovers by foreign companies accused of being involved in human rights abuses. man.

Business Secretary Alok Sharma said if ministers are keen to ensure the UK remains attractive for foreign investment, “hostile players should have no doubts – there is no gate. stolen from the United Kingdom ”.

Ministers and officials have been careful to craft the legislation in a country-neutral manner, but although there are concerns about Russian companies, Chinese corporate takeovers will be the focus of the most scrutiny.

The proposals emerge at a time of heightened political concern over Chinese ownership in key parts of the economy, while the coronavirus pandemic has also exposed dependencies on foreign suppliers for critical products.

A growing number of Tory backbenchers also want to make it harder for Chinese companies to buy strategic UK companies – after successfully forcing the government to ditch Huawei from 5G mobile networks after 2027.

One of the party’s MPs, Bob Seely, said he welcomed the intention of the bill, but wanted ministers to be clear to what extent foreign company takeovers could be stuck in the middle human rights concerns.

“You cannot be neutral about a company involved in slave labor, or in significant intellectual property theft or human rights violation or in helping to set up a surveillance state,” Seely added. .

Last month, Iain Duncan Smith called for a full review of Chinese ownership in the UK, highlighting the country’s main supplier of blood plasma. Rebel MPs are also focusing on Britain’s new nuclear reactor program, in which China General Nuclear wants to build a reactor in Bradwell, Essex.

The existing rules were drawn up in the early days of the last Labor government in 2002, when Tony’s Blair’s administration was keen to introduce a laissez-faire regime and only allowed ministers to consider a takeover on relatively restricted.

At some point in 2006, it emerged, with British approval, that Russian energy giant Gazprom was going to bid on British Gas, although this ultimately did not materialize. In total, there have only been 12 public interest interventions for national security reasons since 2002.

Business Secretary Alok Sharma said hostile actors must be made aware of ‘there is no back door in the UK’ Photography: Stefan Rousseau / PA

The bill will require that takeovers, mergers and other significant transactions in critical sectors of the UK economy be notified to a new investment security unit based in the Department of Business, Energy and Industrial Strategy (Beis).

The exact sectors are subject to consultation, but will include companies operating in areas such as civilian nuclear, communications, defense, transportation, artificial intelligence, computer hardware as well as critical suppliers to government, NHS and police.

But trade deals of all sizes across the economy will come under the regime, and ministers can step in retrospectively for up to five years after a deal is struck. This power will apply from today, which means that any agreement reached in the coming days could be reviewed and canceled in 2025.

Ministers will have 30 days initially to decide whether they want to “call” a takeover or other major transaction, subjecting it to a national security review. This could result in blocking redemptions or a series of conditions imposed on transactions.

Cornelia Andersson, head of mergers and acquisitions (M&A) and capital raising at Refinitiv, said the impact could be significant on the defense, energy and high tech areas of the UK economy . “This could cause costly delays for M&A activity in the UK and could add more pressure to the difficult post-Brexit outlook next year,” she said.


Please enter your comment!
Please enter your name here