Amid increasing volume of takeover deals between German and Chinese companies, Germany authorities have sidelined a Chinese company aiming to buy a stake in a power distributor 50 Hertz for “security considerations.” The announcement came a day after the German government reportedly vetoed a Chinese attempt to buy a German tool manufacturer.
The German government has tasked the state-owned Bank for Reconstruction (Kreditanstalt für Wiederaufbau, KfW) to purchase a 20 percent stake in 50 Hertz, a major electricity provider 50, which builds, operate and supports power grids in the northeast part of the country.
In February, it became known that the State Grid Corporation of China (SGCC) was interested in buying a 20 percent stake owned by Australian investor IFM, which wanted to sell it then.
The remaining 80 percent is owned by Belgian group Elia, which the German government already urged to take over another 20 percent package from IFM at the beginning of the year. Now Elia, which has a “right of first refusal,” has bought the remaining stake to immediately resell it to the German state bank.
The official statement of the German ministries of economy and finance said that the purchase was stipulated with “considerations of security policy.” According to the officials, the government has a “strong interest to protect critical energy infrastructure,” officials said in a statement. However, it also notes that KfW would resell the shares in the future, referring to the purchase as a “bridge solution.”
50 Hertz, with about 1,000 employees, is one of four power distributors operating in Germany. It’s worth $2.1 billion, according to its financials. Its turnover last year equaled $262.6 million.
The announcement about the 50 Hertz deal came just a day after the German government suggested vetoing the sale of a German tool manufacturer, Leifeld Metal Spinning, to a Chinese suitor for the first time, according to The Wall Street Journal. The formal decision is to be accepted during a cabinet meeting on August 1. An unnamed official told the newspaper that the government concluded that the takeover would pose a “risk to public order and safety” and it wanted to keep the entity’s expertise in the field of rocket and nuclear technology in Germany.
The first step was taken last year as Germany tightened its existing regulations, enabling the authorities to block deals with foreign investors in “critical infrastructure” concerning acquisition stakes exceeding 25 percent. It also expanded the period during which the authorities can examine a takeover.
According to the German Ministry of Economic Affairs, the current volume of takeover deals between German and Chinese companies amounts to $14 billion. In 2015, this figure reached only $530 million.
With China’s activity on the German market being higher than ever, the head of the Federal Office for the Protection of the Constitution, Hans-Georg Maaßen, expressed serious concerns about this trend in the spring.
According to Maaßen, along with the positive effect of investments, one should always bear in mind that every Chinese enterprise is obliged to cooperate with Chinese intelligence, which may, in turn, lead to sensitive data leaks.