Germany Said to Toughen Rules, Consider Fund to Block Tech Takeovers by China

September 19, 2018 Updated: September 19, 2018

BERLIN–The German government is taking steps to counter a surge in Chinese bids for stakes in German technology companies, including the creation of a billion-euro fund that could rescue such firms that are in financial trouble, a government source told Reuters.

Senior officials are also working on changes to foreign trade regulations to ensure that key technologies remain in German hands. The tightened rules would include government reviews of foreign acquisitions of stakes in companies below the current 25 percent threshold, and expanding which types of purchases must be examined.

“This is an issue that we are working on very intensely,” according to the source, who wasn’t authorized to speak publicly.

Berlin was galvanized to action by the surprise takeover of robotics firm Kuka by China’s Midea in 2016 and the purchase earlier this year of a 9.7 percent stake in Daimler by Chinese carmaker Geely.

Chinese companies completed 30 acquisitions in Germany last year, almost double the number for 2016, and Chinese proposals accounted for 40 percent of the 165 reviews of foreign-takeover plans in the past three years, the person said.

Chinese firms, some state-owned, are particularly interested in German companies with special know-how, startups in the area of new technologies, and companies active in critical infrastructure fields, the person added.

As a last resort, the government also wants to set up a fund that could help companies if no private investors could be found to replace a possible Chinese bidder, or if guarantees by the state development bank KfW aren’t sufficient.

“We are talking about 1 billion euros that would be available as a last resort,” the source said, adding that the money could also be used proactively to support the development of key technologies by German firms.

Further details weren’t immediately available about how the instrument would be funded.

A spokeswoman for the economy ministry on Sept. 19 said the government wasn’t thinking about creating a state-owned fund to defend companies, but that it was working on a mechanism to ensure Germany’s technological sovereignty.

“We are looking into creating a mechanism with the aim of securing the technological sovereignty of the German industry,” she told a regular government news conference.

The German government also signaled its willingness to use a new power to veto foreign takeovers of German companies in the case of a Chinese bid for toolmaker Leifeld, prompting China’s Yantai Taihai to drop its bid.

In July, after failing to find a private investor for the firm, the KfW bought a stake in high-voltage grid operator 50Hertz to prevent China’s state grid from making the acquisition.

By Andrea Shalal & Thorsten Severin