Mon, Feb 14, 2011 - Page 11 News List

China to scrutinize foreign takeovers with review panel

Bloomberg

China plans to create a ministerial panel to review takeovers of local companies by foreign investors.

The panel will be led by the National Development and Reform Commission and the Ministry of Commerce and will be overseen by the State Council, according to a statement published yesterday on the council’s Web site.

Coming under scrutiny would be acquisitions involving military industrial companies and others relating to national defense, the statement said. It also would look at takeovers involving producers of agricultural goods, energy and natural resources, as well as companies in some parts of the infrastructure and -transportation-services industries.

“Now foreign-funded [mergers and acquisitions] in China would be subject to review by a state-level investment-review authority and can be blocked on the ground of endangering national security, which may not be received favorably by international investors,” said Hubert Tse, a Shanghai-based partner at law firm Boss & Young.

Takeovers of companies in Brazil, Russia, India and China, surged almost 80 percent last year and account for a record 22 percent of the US$2.23 trillion of transactions worldwide, according to data compiled by Bloomberg.

Acquirers from BRIC nations (Brazil, Russia, India, and China) announced US$402 billion of takeovers, a 74 percent increase from 2009 and more than quadruple five years earlier, the data show.

This year, China has accounted for 278 transactions valued at US$9.1 billion, compared with US$19.6 billion for the Asia-Pacific region and US$229.4 billion globally, according to Bloomberg data.

In 2009, the Chinese government blocked Coca-Cola Co’s planned purchase of China Huiyuan Juice Group Ltd (匯源果汁), which would have been the biggest foreign takeover of a Chinese company. The Commerce Ministry said competition would have been hurt by Coca-Cola’s control over China’s juice and beverage market.

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