Daily Management Review

The US is holding back a wave of Chinese acquisitions


07/21/2017


A secret government group in the US has objected to at least nine acquisitions of US companies' shares by foreign investors this year, Reuters reports citing its own sources.



According to the publication’s sources, this is a historically large number of acquisitions, which foreshadows problems for China's foreign acquisitions.

All these objections point to the fact that the Committee on Foreign Investment in the United States (CFIUS), which considers acquisitions of foreign companies from potential risks to national security, is increasingly prone to caution under President Donald Trump.

As a result, Chinese companies and investors considering the probability of acquiring assets in the US may face serious obstacles, while the Chinese government also restricts capital outflow from China after the termination of Chinese transactions abroad.

So far, 87 applications for the acquisition of US companies by Chinese companies have been registered, in 2017 which is the highest and exceeds 77 deals in the corresponding period of 2016.

CFIUS's more conservative position towards the deals coincides with the growing political and economic tensions between the United States and China. On Wednesday, the two countries did not agree on major new steps to reduce the US trade deficit with China.

Since the beginning of the year, the CFIUS has sent letters to companies participating in at least nine transactions to state that they will be blocked based on the measures they proposed to eliminate the potential risks to national security, people familiar with the situation said.

According to sources, many of these transactions relate to the technology sector. The growth of cybersecurity threats and rapid advances in technology make it difficult to determine whether a deal represents a threat, told lawyers presenting the companies at the CFIUS.

CFIUS initial objection to any transaction does not necessarily immediately lead to its cancellation.

Some companies this year decided to keep their bids in the CFIUS, offering new measures to mitigate the conditions, while others withdrew their applications and canceled the transaction, sources said.

source: reuters.com






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