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German gvnt to toughen rules to protect German 'know-how' from foreign takeovers

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German gvnt to toughen rules to protect German 'know-how' from foreign takeovers
A robot produced by German firm Kuka, which was taken over by a Chinese company last year. Photo: DPA.
10:50 CEST+02:00
Angela Merkel's cabinet agreed on Wednesday to tighten scrutiny on takeovers of companies in strategic industries by buyers outside the EU, the Economy Ministry said, reacting to Europe-wide disquiet over Chinese takeovers.

New regulations will allow Berlin more time to probe takeover bids, especially in sectors affecting critical infrastructure, and extend the range of deals eligible for examination by the authorities.

"We remain one of the most open economies in the world, but we also have an eye on fair competition. We owe that to our companies," Economy Minister Brigitte Zypries said in a statement.

"In the future, reporting requirements and more time to examine deals will provide more protection and reciprocity for companies in critical infrastructure."

The new rules extend takeover probes to include companies providing services or software to strategic sectors including electricity grids, nuclear power plants, water supplies, telecoms networks, hospitals and airports.

“We know that there is critical infrastructure that is attractive to investors,” Economy Ministry State Secretary Matthias Machnig told the Süddeutsche Zeitung.

“We are indeed an open political economy, but we are not naive.”

More defence companies manufacturing or developing "key technologies" are also covered than under previous rules.

It doubles the time civil servants have to probe proposed deals by non-European Union or European Free Trade Association (EFTA) buyers from two to four months.

And it makes clear that "indirect" takeovers - where a non-EU firm creates a company within European borders as a vehicle for a buyout - will also be subject to examination.

In its statement, the Economy Ministry said Germany would work also with France and Italy to push for similar changes to EU law.

Valuable know-how

According to the Süddeutsche Zeitung, which first reported about the planned new rules, the reform is a late response to the controversial takeover of Augsburg robotics maker Kuka last year by the Chinese firm Midea. Disquiet about a wave of foreign acquisitions by Chinese companies has been growing in Berlin since then.
 
With robots becoming increasingly critical in the manufacturing sector - which forms the backbone of Europe's largest economy - German leaders were alarmed to see valuable know-how being transferred abroad.
 
Months after the Kuka takeover, authorities withdrew approval for the acquisition by China's Grand Chip Investment of chip equipment maker Aixtron.
 
That decision was based on US concerns over Aixtron's products, which United States intelligence services warned could have military applications.
 
And concerns extended beyond China after US-based Tesla Motors took over Grohmann Engineering.
 
The firm, previously a supplier to German carmaking behemoths like BMW and Daimler, redirected most of its machine tools output to Tesla after the acquisition.
 
In recent weeks, Chancellor Merkel has drawn closer to French President Emmanuel Macron, who has called for increased protection against non-EU takeovers.
 
Macron failed to convince fellow EU leaders to grant Brussels more takeover-blocking powers at a meeting in late June.
 
But the German leader took his side in a magazine interview a week later, saying she wanted to protect "strategic" EU industries and for Europe to "defend its influence and above all to speak with one voice" to Beijing.

In February, German, French and Italian economy ministers warned the EU Commission about a “possible sell-off of European expertise”.

The German government’s efforts to protect its industries comes just days after members of the G20 summit in Hamburg on Saturday reached a compromise to "fight protectionism", while allowing countries to use "legitimate trade defence instruments" to protect their markets.

This was seen by some to be a concession to US President Donald Trump, who has been critical of international free trade agreements under a motto of “America first”.

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