UK to tighten takeover rules for groups vital to virus response
Alok Sharma says new powers will protect national interest in future health emergencies
The UK government will immediately tighten takeover laws to ensure British businesses critical to tackling the coronavirus pandemic are less susceptible to hostile foreign takeovers owing to the economic downturn.
On Monday, business secretary Alok Sharma will amend legislation to allow the Department for Business, Energy and Industrial Strategy to intervene if companies — such as protective equipment manufacturers and those in the food supply chain — are deemed critical to the UK’s pandemic response but are struggling financially and facing a takeover by foreign powers.
Boris Johnson’s government has pledged to introduce tougher powers to intervene when businesses face being taken over by companies based in countries that are deemed unfriendly to the national interest. There is a particular concern among Tory MPs about the role of China, which has aggressively pursued businesses seen to be crucial to the UK’s strategic interests.
The new measures, to be voted on by MPs on Monday and, if passed, would come into force on Tuesday, are a short-term fix that will allow the government to intervene in mergers and takeovers that have a public interest consideration in tackling a health emergency. This is in addition to the existing areas where public interest can be cited for blocking a takeover, such as national security, media plurality and financial stability.
These changes to the UK’s existing takeover legislation come ahead of a new National Security and Investment (NSI) bill — expected later this summer — that will give the government further and more comprehensive powers to intervene in takeovers, with a particular focus on China.
Under the NSI bill, any transaction with national security concerns — even the purchase of a large shareholding or intellectual property rights — will have to be notified to the takeover authorities. Sellers, for example, will be expected to report when they intend to sell more than 50 per cent of one asset or more than 25 per cent of shares in their company.
Mr Sharma said that the tweaks to the 2002 Enterprise Act would “strike the right balance” between protecting national security while remaining “an attractive place to invest”.
“The UK is open for investment, but not for exploitation,” the business secretary said. “These powers will send an important signal to those seeking to take advantage of those struggling as a result of the pandemic that the UK government is prepared to act where necessary to protect our national security.”
In an article explaining the decision, Mr Sharma said: “This legislation is not anti-investment, but a sensible and proportionate response to the heightened risks posed by the pandemic . . . the change will mean that if an investor targets a firm critical to fighting Covid-19 or a future pandemic, I will be able to intervene.”
Tom Tugendhat, chair of the foreign affairs select committee who has campaigned for a stricter takeover regime, welcomed the change. “It’s an important first step given the crisis, but this isn’t just about public health and it would be good to further as soon as possible,” he said.
The government also announced plans to further scrutinise takeovers for smaller companies specialising in new technologies such as artificial intelligence, advanced materials and cryptographic authentication. These measures will not be introduced immediately and will instead be debated at a later date by parliament.
Plans to further scrutinise takeovers over security concerns were first announced by former prime minister Theresa May. Mr Johnson pledged in December to introduce legislation that would deal with “the buying up of UK technology now by countries that . . . may have ulterior motives.”