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Germany Moves to Shield Key Companies From Foreign Takeovers

German Move to Counter Foreign Takeovers Set for Final Approval

Chancellor Angela Merkel’s move to tighten protections for German companies from foreign takeovers gained final approval in parliament on Thursday, amid concern about potential acquisitions by firms bankrolled by China and other nations.

Economy Minister Peter Altmaier, a close Merkel ally, told lawmakers before the vote that the screening legislation is not meant to impede investment into Europe’s biggest economy, but to help shield key German companies, including those that may be more vulnerable due to the fallout from the coronavirus.

Germany Moves to Shield Key Companies From Foreign Takeovers

“Our hidden champions, our small and mid-sized companies, and firms that are temporarily suffering because of the coronavirus pandemic, should not all become defenseless takeover targets,” Altmaier told lawmakers in the Bundestag in Berlin.

“We want to know what is happening, we want to know who is behind potential investors,” he added. “Not all those who want to invest have equally honest intentions.”

The law will enable the government to block acquisitions that present “potential interference,” a lower threshold than previous rules that envisage a security threat. It also lowers the minimum for scrutinizing investments in the health-care sector. Deals involving a stake of at least 10% will be examined, compared with 25% previously.

Read more: Pandemic Forces Europe to Weigh Unified Front Against Takeovers

As well as shielding producers of drugs and protective gear, the new rules will also protect German companies active in the energy sector and the digital economy, Altmaier said last month.

Germany this week agreed to buy a 23% stake in CureVac AG, a player in the race for a coronavirus vaccine, as governments jockey to ensure a supply of any successful pandemic shot. The announcement comes after speculation flared up in March that the U.S. was angling to buy the company or its technology.

Germany’s move to tighten protections for its firms reflects a wider trend across Europe. EU Competition Commissioner Margrethe Vestager on Wednesday unveiled plans to bolster local industries in fighting back against mergers and acquisitions and unfair competition from rivals subsidized by foreign states.

The suggested curbs, which could be formalized in draft legislation next year, could eventually lead to some firms being banned from making acquisitions, or force them to divest assets, and allow the European Commission to impose fines. They effectively extend Europe’s strict system of state-aid limits to businesses worldwide.

©2020 Bloomberg L.P.