Wed, Jul 25, 2018 - Page 10 News List

UK expects 50-fold rise in interventions on foreign takeovers

SCRUTINY:The proposals would widen the scope in which officials could intervene in deals relating to national security, a UK business department said

Bloomberg

The UK anticipates a 50-fold increase in interventions on takeovers of British companies and assets as a result of changes ministers outlined yesterday.

The proposals widen the scope in which ministers could intervene in deals over national security, the UK Department for Business, Energy and Industrial Strategy said.

The department expects to examine about 100 deals this year and undertake some kind of remedy in about half of those, it said in a briefing to reporters.

It intervened in just one case last year and another this year.

New rules remove the requirement that acquisition targets have a £70 million (US$92 million) turnover and for the new entity to account for a 25 percent market share before the government can intervene.

They also expand the scope to include all industries as well as assets and units of companies, rather than just whole corporations. The regulations would apply to both foreign and British purchases of UK assets.

Until now, interventions have been governed by the 2002 Enterprise Act, which allows them when a proposed merger would affect media plurality, national security or public contracts.

The department made changes earlier this year that removed thresholds on market share and turnover for some companies, but yesterday’s proposals widen that to all sectors.

The department also plans to list sectors where it anticipates having more of an interest in intervening — including energy, defense and transportation.

The government retreated from earlier plans to require companies to report proposed deals to the department. Instead, companies will be able to do so voluntarily to avoid potential intervention further down the line when a deal is more advanced. The government would then have a mandatory time period within which to respond to give certainty to the businesses.

Ministers also plan to introduce a criminal offense so that directors could face prison sentences of as long as five years if companies breach undertakings they make to secure government approval for a deal.

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