Beijing appeals to US for fairness under investment law

The law signed Monday by President Donald Trump expands the authority of a government security panel to scrutinize foreign investments. (AP)
Updated 14 August 2018

Beijing appeals to US for fairness under investment law

  • The law signed Monday by Donald Trump expands the authority of a government security panel to scrutinize foreign investments
  • Other governments including Germany and Britain also are uneasy about rising Chinese investment

BEIJING: China appealed to Washington on Tuesday not to misuse security concerns to hamper business activity after President Donald Trump signed a law that expands the jurisdiction of an investment review panel.
The law signed Monday by Trump expands the authority of a government security panel to scrutinize foreign investments. It was prompted by complaints Chinese companies were taking advantage of gaps in US law and improperly obtaining technology and possibly sensitive information.
“The United States should treat Chinese investors objectively and fairly and avoid making a national security review an obstacle to Chinese-US enterprises’ investment cooperation,” said a Commerce Ministry statement.
Other governments including Germany and Britain also are uneasy about rising Chinese investment, the communist Beijing government’s behind-the-scenes role and acquisitions of technology that might have military uses or is seen as an important economic asset.
The US security panel, known as CFIUS, reviews foreign acquisitions of American assets for possible security threats. Critics say legislation governing its powers, last updated a decade ago, was antiquated and failed to take into account tactics used by some Chinese companies.
The legislation signed by Trump expands CFIUS jurisdiction to cover entities that might own a minority stake in a company that makes a purchase. It also gives CFIUS authority to prevent loss of sensitive personal information.
The legislation also gives CFIUS authority to initiate its own investigations instead of waiting for a buyer to seek approval.
Lawmakers who proposed the legislation last year expressed concern that Chinese companies were using joint ventures with foreign companies or minority stakes in ventures to gain access to sensitive technology.
Last month, a proposed Chinese purchase of a German power company was blocked when a state-owned utility bought the company instead. German news reports said Berlin also planned to block a Chinese acquisition of an engineering company but authorities said later that bid was withdrawn.
Also last month, Britain’s government announced a proposal to expand its powers to block foreign acquisitions that pose security concerns. It would apply to deals in which a foreign buyer acquires as little as 25 percent of a company.
Germany and other governments also complain their companies are barred from buying most Chinese assets at a time when China’s companies are in the midst of a multibillion-dollar global acquisition spree.


STC postpones its acquisition of Vodafone Egypt for second time

Updated 28 min 44 sec ago

STC postpones its acquisition of Vodafone Egypt for second time

  • Kingdom’s largest telecom company says it will need an additional two months to complete the deal

CAIRO: The Saudi Telecom Company (STC), the Kingdom’s largest telecom company, said that it will need an additional two months to complete a deal to purchase a 55 percent stake in Vodafone Egypt.

In January, STC was in agreement to buy the stake for $2.4 billion. In April, it extended the process for 90 days due to logistical challenges stemming from the spread of COVD-19. The company said in a statement that it would extend the period again to September for the same reason.

The Public Investment Fund, the Saudi sovereign wealth fund, owns a majority stake in STC. The ownership of Vodafone Egypt is divided between 55 percent for Vodafone International, which is the target percentage of the Saudi purchase offer, 44.8 percent for Telecom Egypt, and the remaining 0.2 percent for small shareholders.

Telecom Egypt is awaiting the results of Vodafone’s evaluation of the final share price to announce its position on the deal. A Telecom Egypt official stated that the company is still awaiting STC’s position regarding the purchase of the share. If the deal is not completed, it may be presented with its rights to acquire Vodafone’s share, which would allow it to take over 99.8 percent of the company’s shares, leaving 0.2 percent for small investors.

Ashraf El-Wardany, an Egyptian communications expert, pointed out the importance of waiting until the procedures between STC and the Vodafone Group are complete. The results will determine the next steps by Telecom Egypt.

El-Wardany said that the Saudi operator must, after completing the relevant studies, submit a final binding offer at the share price and any conditions for purchase. If approved by Vodafone, it must submit the offer with the same conditions and price to Telecom Egypt, provided that the latter responds within a maximum period of 45 days to determine its position regarding the use of the right of pre-emption and the purchase, or lack thereof, of Vodafone’s share.

According to El-Wardany, there are other possible scenarios. Vodafone International may not be convinced of the offer or the conditions presented by the Saudi side and the sale may be withdrawn, or the Vodafone group may be ready to sell and has prepared another buyer for its stake in Egypt in the event of rejecting the Saudi offer. It may also it back away from the deal and continue to operate in Egypt for a few more years.

El-Wardany said that if Telecom Egypt decides not to use the right of pre-emption to acquire the remaining Vodafone shares for any reason, it will continue with its 44.8 percent stake.
It may also resort to selling all of its shares or part of it to the Saudi side or to any company that wants to acquire its stake.

“This raises the question of whether STC can acquire all of Vodafone’s shares,” El-Wardany said, adding that the coming months “will make the answer clear.”