Increasing overseas acquisitions in the EU triggers call for foreign bids vetting

The increasing number of overseas acquisitions in the European Union has triggered calls for vetting of foreign bids, reported Reuters. There has been a wave of foreign acquisitions targeting companies in the European union, but opposition to the vetting move is however strong. According to Reuters, such a measure will be hard to sell.
Two European Commissioners had written a proposal that seeks to form a high-level board with powers to reject bids by foreign companies or investment funds looking to buy EU companies or other assets. However, many of the EU’s diplomats have rejected the proposal, Reuters reported. The proposal had been forwarded by Italy’s Antonio Tajani and France's Michel Barnier.

The two suggested that the EU consider creating a centralized committee – similar to those in the United States, Canada, Japan, China and Australia -- to vet foreign bids on strategic grounds. Under the proposal, such a centralized committee would replace Europe's existing patchwork of national oversight bodies, creating a more unified vetting process.

The proposal was addressed to EU Commission President Jose Manuel Barroso, detailing plans for such a regulatory move, Reuters’ sources said. The proposals from the commissioners in charge of industry and the single market underline concern among some senior EU officials about unchecked foreign investment, particularly from China, India, Russia and Brazil.

However, the strong opposition to the idea of stricter foreign acquisition vetting is reflective of the deep differences among European policymakers over managing foreign investment flows, and whether critical sectors such as banking, telecoms, automobiles and steel should be protected, said Reuters.

National authorities in the Netherlands, Britain and Scandinavia are traditionally open to foreign investment, mergers and acquisitions while French and Italian authorities have at times moved to protect national interests.

According to Reuters, critics of foreign direct investment warn that Europe risks giving up precious technical know-how and sectors of strategic importance to unknown investors. Advocates defend it as critical to Europe's ability to emerge stronger from financial crisis.

Separately, the European Commission will examine whether minority shareholders should be covered by the European Union's merger rules, EU antitrust chief Joaquin Almunia said Thursday. EU rules don't require a shareholder with a non-controlling stake in a company to tell the commission if the company is involved in a merger or if the shareholder is involved in a merger in a similar sector.

11th March 2011

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