The executive blocked foreign investment for the first time

Posted on Jan 3, 2021 at 7:00 am

Have American companies, the most active in purchasing in France and in Europe, become undesirable on French territory? The government veto inflicted in mid-December on the American Teledyne for the purchase of the defense optronics specialist Photonis created in any case a precedent in the control of foreign investments, directed until then mainly against the Chinese inclinations.

Over the period 2008-2020, American groups sealed a record of 110.5 billion dollars in France (out of 1.736 billion in Europe), far ahead of other states (including China, 18 billion), according to Refinitiv. Even in the Alstom affair, the tightening of the control system enacted by the former Minister of the Economy Arnaud Montebourg had not prevented General Electric from getting their hands on the energy branch of the French industrial flagship.

The Photonis file marks several ruptures. This is not only the first official government veto targeting a foreign acquisition (verbal, via the Ministry of the Armed Forces), but above all it concerns a company from an “allied” country, already widely established in France with more than 800 employees. on the territory and recognized supplier of the Ministry of the Armed Forces.

In addition, it is one of the very first applications by Bercy of the new foreign investment control framework adopted in the spring (the ministry’s silence is vetoed after a month), as Teledyne points out in its press release. to the SEC. Many see it as a change of course in the protection of French strategic interests. As evidenced by symmetry, the official intervention of Foreign Minister Jean-Yves Le Drian in the takeover by the luxury giant LVMH of the American Tiffany.

“By refusing in the case of Photonis an operation of an allied country, during the American handover of powers, the French government can skillfully claim an impartial approach to its system”, particularly vis-à-vis China, analyzes the expert Pascal Dupeyrat, founder of the firm Relians.

The United States has been the main acquiring country in France since 2008 according to Refinitiv.

Another rupture: this veto comes when the government was involved, almost a year ago, in the analysis of the credibility of buyers. From now on, “Foreign buyers will necessarily have to take into account the existence of a politico-institutional hazard, which can lead in some cases to rejection, even in the last straight line”, explains Pascal Bine, associate lawyer of the American firm Skadden.

Now also it is clear that “The combination between the safety committee, Bpifrance, guaranteed return and the right of veto is a sine qua non of the State for all very sensitive operations”, emphasizes the lawyer. For the record, an internal monitoring committee with representatives of the State had been required. Bpi had also been taxed in the capital of the French company, preventing any tax integration with the American Teledyne, which was also to pay it a stratospheric yield of 7% over eight years, greatly degrading the financial interest of the operation.

These requirements were seen by observers as an attempt, at first, to discourage the buyer without having to impose a formal veto, taboo on Bercy, which defends the attractiveness of the territory. But the step is now taken. It remains to be seen whether the government will use its veto in sectors less sensitive than defense, such as transport, telecommunications or biotechnology, which are also covered by the control mechanisms.

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