Wed, Oct 18, 2017 - Page 10 News List

Britain proposes tougher M&A rules

PROPOSALS:Lowering the threshold at which the government can scrutinize deals to at least £1 million would apply to computer chip and quantum technology companies

Reuters, LONDON

Britain wants more say over deals in its military and technology sectors, as the government tries to prevent homegrown companies in sensitive industries from falling into foreign hands.

The proposals, announced yesterday as part of a broader consultation on potential changes to takeover rules, mark a shift for a country which has traditionally been one of the most open to foreign merger and acquisition (M&A) deals.

That emphasis has changed, with a string of acquisitions by Chinese companies across the world fueling security concerns in countries, including Germany and the US.

The weakening of the pound since Britain’s vote to leave the EU has also made UK companies cheaper for foreign buyers.

Last month, Canyon Bridge Capital Partners — a China-backed buyout fund that was barred a week earlier by US President Donald Trump from buying a US chipmaker — agreed to buy British chip designer Imagination Technologies for £550 million (US$731 million), sparking criticism from some politicians and media of the UK’s relaxed rules.

“Britain has and always has had a proud record of being open to the world as the foremost advocate of free trade,” British Secretary of State for Business, Energy and Industrial Strategy Greg Clark said in a statement yesterday. “It is right that every so often the government reviews its mergers regime to close loopholes where they arise and this is what these proposals do in the area of national security.”

The proposals include lowering the turnover threshold at which the government can scrutinize deals to companies with annual revenues of at least £1 million, from £70 million previously.

The proposed changes would apply to companies in the military sector and those involved in the design of computer chips and quantum technology.

The world’s fifth-largest economy is trying to balance the need to remain open for investment after the Brexit vote sparked fears it could become less attractive for business, while upholding a pledge by British Prime Minister Theresa May to intervene when big foreign investments concern critical assets.

Since the Brexit vote in June last year, Britain has remained a busy market for mergers and acquisitions, with the value of deals up 26 percent so far this year to US$125 billion, Thomson Reuters data show.

The government also said it would open a twelve-week consultation period on longer-term reform proposals, including an expanded version of the “call in” power that allows government to scrutinize a broader range of transactions for national security concerns within a voluntary notification regime and a mandatory notification regime.

May, who became prime minister after the Brexit vote, faced one of her first major challenges when she gave the go-ahead for a US$24 billion plan for a Chinese-backed nuclear power plant in southwest England.

In July lsat year, Japan’s Softbank Group Corp agreed to buy Britain’s most valuable technology company, Arm Holdings, for US$32 billion in cash.

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