By Simon Clark and Ben Dummett
European governments are strengthening protections against
foreign business takeovers as concerns grow that companies whose
share prices have slumped because of the coronavirus outbreak are
vulnerable to unwanted approaches from bargain hunters.
New protective moves from Italy, Germany, Spain and other
countries come as Saudi Arabia's sovereign-wealth fund has snared
stakes in European energy giants Equinor ASA, Eni SpA and Royal
Dutch Shell PLC. The Saudis also bought into Miami-based Carnival
Corp., the world's largest cruise operator, whose shares have been
hammered by the pandemic.
In China and other Asian countries, where life shows signs of
returning to normal, business executives are starting to consider
ways to invest in Europe amid the market slump, said Nestor
Paz-Galindo, UBS Group AG's head of mergers and acquisitions in
Europe. But, he said, the increased regulatory scrutiny could
prevent a flurry of deals.
Protectionism has risen in the U.S. and Europe in recent years,
as President Trump and politicians in the U.K., France and Germany
sharpened tools to block foreign takeovers of strategic
companies.
Many of those moves were spurred by China's appetite for
technology companies, which raised concerns over Chinese businesses
making acquisitions that could potentially be used by Beijing to
gain an economic or militarily advantage. In 2018, for example,
Germany blocked the sale of machine-tool maker Leifeld Metal
Spinning AG to a Chinese investor.
"The coronavirus has accelerated a trend of governments putting
the national interest first," said Samantha Mobley, a London-based
partner at law firm Baker McKenzie who specializes in competition
law.
Italian Prime Minister Giuseppe Conte this week announced
increased powers to block foreign takeovers--including by companies
based in other European Union nations--in response to the economic
chaos caused by the coronavirus. Milan's benchmark stock index has
lost about a third of its value since the virus exploded in Italy
in February and the slump has fueled fears that the nation's
companies are vulnerable to unwanted takeovers.
The EU's executive arm warned member states last month that the
impact of the virus made it even more important to screen takeover
offers from outside the bloc to prevent the loss of companies
crucial to the region's health and security.
"EU industry needs decisive protection to prevent strategic
replacement and to avoid a great takeover," Aegis Europe, an
alliance of more than 20 European manufacturing associations, said
in an April 2 letter to European Commission President Ursula von
der Leyen.
Mr. Conte went a step further than others in saying he could
even block buyers based in other EU nations. The Italian prime
minister's so-called golden power shields banks and insurers as
well as companies in the food, health, transport, water,
technology, communications, energy and defense sectors.
"We have strengthened the golden power," Mr. Conte said in Rome
on Monday. "It guards all these companies and enables us to
intervene in takeovers from within the European Union."
Germany's government said Wednesday that it was increasing
protection of German and European companies. Spain also recently
announced measures, and France has increased protections.
"The current situation especially shows the need to have our own
technologies and competencies in specific areas in Germany and in
Europe, " German Economy Minister Peter Altmaier said on Wednesday.
"With this, we can better protect European security interests."
Social lockdowns intended to contain the virus have suffocated
economies and erased trillions of dollars from stock markets. The
Stoxx Europe 600 index has fallen about 20% this year, while in the
U.S. the S&P 500 stock index has dropped about 14%.
Angelica Donati, a former Goldman Sachs Group Inc. banker who
now leads a real-estate development company in Rome, supports the
Italian government's policy as long as it is temporary. Mr. Conte
said the broadening of his golden power rule will last until the
end of the year.
"It's about monitoring hostile takeovers and I think that it
makes perfect sense in this climate," Ms. Donati said in an
interview. "It doesn't stop you from agreeing to a sale. What it
stops is raiders coming in and trying to get bargain basement
deals."
Italy has resisted approaches from companies in other EU
countries in the past and introduced the golden power rule in 2012
to protect companies vital to defense and national security. It
enables the government to veto or impose restrictions on takeovers
of companies considered to be strategically important.
Mr. Conte's expansion of the rule to cover more sectors, such as
finance, and protect them from EU buyers contrasts with his strong
support for so-called coronabonds--mutualized debt that would be
issued at the EU level, instead of by member states, to finance the
fight against the virus.
In Italy, increasing the power to resist European takeovers
while endorsing EU debt are both positions seen by some as helping
the nation at a critical time, as serving the national interest,
according to Marcello Messori, an economics professor at Rome's
LUISS University.
"The Italian government feels that Italy is really in a fragile
situation," Mr. Messori said.
Protectionist policies could unravel EU integration if they
harden further, said Andrea Bonomi, the Italian founder of
Investindustrial, one of Europe's biggest private-equity firms.
"If the golden power is the beginning of a protectionism
movement, then it's the beginning of the end," Mr. Bonomi said in
an interview. "If the golden power is to protect as you build your
country, then it's the beginning of the future. I'm betting on
that."
Ruth Bender contributed to this article.
Write to Simon Clark at simon.clark@wsj.com and Ben Dummett at
ben.dummett@wsj.com
(END) Dow Jones Newswires
April 10, 2020 07:14 ET (11:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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