BY Richard Summerfield
The French government has won the approval of the EU for a controversial new law which grants the government more power to block takeovers of French companies in strategic industries.
The decision, announced by French economy minister Arnaud Montebourg, was based around the government’s move to extend its control over mergers and acquisitions in industries which have been deemed key to France's national interests. The new law was inspired predominantly by the deal that saw General Electric Co (GE) successfully acquire the energy assets of French group Alstom.
“The European Commission in recent days notified the French government of its approval of the decree as perfectly in line with European treaties,” said Mr Montebourg in a conference speech in France. “It was used in the GE-Alstom case. It will be used again in certain sensitive sectors such as water, health, national defence, gaming, transport, energy and telecommunications" he added.
Although the European Commission, the EU’s executive body, has approved the law, it is not willing to provide the French government with carte blanche to veto deals in the future. Indeed, the Commission has announced that it intends to closely monitor the situation in the months ahead. A spokeswoman for Europe’s financial services chief Michel Barnier wrote "We recall restrictions on free movement of capital can be justified if the objective pursued is one of public policy and public security. Any action taken to restrict free movement needs to be proportionate and serve the public interest. We will closely monitor any use of the law, i.e. systematically monitor any application of the investment screening legislation, and check in particular that it is not used to achieve purely economic objectives."
Following a protracted negotiation period, GE’s takeover of Alstom was finally approved at the end of June. The company was forced to overcome a number of hurdles in order to finally get the deal ratified. Most notably, the $17bn takeover of Alstom’s energy assets was only approved after one of Alstom’s existing shareholders, Bouygues, agreed to sell a stake in the firm to the French government. As per the government’s terms, Bouygues will be required to sell as much as 20 percent of Alstom to the state. GE beat out competition from Siemens AG and Mitsubishi Heavy Industries, which tabled a rival bid for Alstom’s assets.