EU to introduce measures to block "politically-motivated" foreign investment

BY James Williams

Due to concerns over “politically-motivated” takeovers, the European Union (EU) has proposed a range of measures that it says will require foreign investors to rethink their investments in Europe.

The EU action is designed to address takeovers in sectors that three countries – Germany, France and Italy – have said could harm Europe's strategic interests, with concerns arising that technological proficiency is ‘leaking abroad’.

The proposals by the EU, which already has the power to block takeovers on antitrust grounds, would give the EU further powers to scrutinise investments in the US if they are deemed to be of strategic importance, from both an economic and a security perspective.

According to the European Commission's (EC) industry department, investments in sectors such as defence and transport infrastructure, as well as sectors which utilise critical and cutting-edge technologies, will be under the microscope. The EC department has also said that deals which it feels could conceivably risk “economic prosperity” will also be closely scrutinised.

Furthermore, the proposals would give the EU the power to block takeovers by any company whose motivation is considered to be "just for the purpose of disposing its overcapacity" – a determination which could well apply to sectors such as steel production which, for a number of years, has seen Europe accuse China, for example, of dumping under-priced goods.

Such a blocking mechanism may also apply to takeovers of EU companies by an EU-based subsidiary of a foreign firm, says the EU, or even in cases of "infiltration of the management with individuals from non-EU countries" who have the means to access data and technology.

Among the recent deals which have raised concerns and prompted the EU’s intervention is the $5bn acquisition of the German robotics maker Kuka by China’s Midea. Other German companies, such as Kion, Putzmeister and KraussMaffei , have also come under Chinese ownership in recent years.

“A growing number of non-EU investors were buying up European technologies for the strategic objectives of their home country”, said the economy ministers of France and Germany and Italy's industry minister this week. This is despite the barriers investors face when trying to lay their hands on assets in other countries.

For the proposals to get the go-ahead, all departments within the EC would need to give their approval. However, at a time of relentless euroscepticism, the proposals suggest that the EU “would maintain the right to allow or deny a takeover even after EU vetting”.

News: EU plans measures to block foreign takeovers of strategic firms

Driverless tech the catalyst for Intel’s $15.3bn acquisition

BY Richard Summerfield

Intel Corp announced yesterday that it was to acquire Israeli driverless technology company Mobileye in a deal worth $15.3bn. The deal is another show of confidence in the nascent driverless automobile space.

According to a statement announcing the deal, Mobileye’s shareholders will receive $63.54 per share in cash, making the deal the biggest ever acquisition of an Israeli technology company. The deal is expected to close in the next nine months, pending regulatory approval and certain other closing conditions. Mobileye’s shares closed at $47.27 on Friday in New York.

Once the merger has been complete, Mobileye’s current chief technology officer and co-founder, Professor Amnon Shashua, will lead Intel’s autonomous driving division, which will be based in Israel. Doug Davis, Intel’s senior vice president will oversee how Mobileye and Intel work together across the whole company and will report to Professor Shashua going forward.

Intel estimates the vehicle systems, data and services market will be worth as much as $70bn by 2030. The deal for Mobileye will allow them to position themselves at the forefront of the emerging – and disruptive – driverless technology.

Intel, synonymous with personal computers, has seen its standing negatively impacted by the proliferation of smart devices, which have overtaken PCs in popularity and usage.

“This acquisition is a great step forward for our shareholders, the automotive industry and consumers,” said Brian Krzanich, Intel's chief executive. “Intel provides critical foundational technologies for autonomous driving including plotting the car’s path and making real-time driving decisions. Mobileye brings the industry’s best automotive-grade computer vision and strong momentum with automakers and suppliers. Together, we can accelerate the future of autonomous driving with improved performance in a cloud-to-car solution at a lower cost for automakers.”

The acquisition of Mobileye comes after a period of cooperation between the two companies; Intel – along with Delphi Autmotive – began working on an affordable driverless car with Mobileye in November 2016.

“We expect the growth towards autonomous driving to be transformative. It will provide consumers with safer, more flexible, and less costly transportation options, and provide incremental business model opportunities for our automaker customers,” said Ziv Aviram, co-founder, president and chief executive of Mobileye . “By pooling together our infrastructure and resources, we can enhance and accelerate our combined know-how in the areas of mapping, virtual driving, simulators, development tool chains, hardware, data centers and high-performance computing platforms. Together, we will provide an attractive value proposition for the automotive industry.”

News: Intel's $15 billion purchase of Mobileye shakes up driverless car sector

Divestments set to soar across the globe, suggests new study

BY James Williams

Geopolitical disruptions such as a volatile business landscape and regulatory upheavals are driving companies to pursue divestments in ever-increasing numbers, according to EY’s ‘2017 Global Corporate Divestment Study’.

The study, based on a survey of more than 900 corporate executives worldwide, notes that the uptick in divestments is very much being driven by geographical footprints, with companies in Europe, the Middle East and Africa (EMEA) reporting that regional political instability (cited by 81 percent) and Brexit (cited by 73 percent) among the top issues.

Across the globe, 57 percent of multinationals in the Americas have indicated that their divestment decisions are motivated by technological change, with 84 percent also focused on regulatory changes. Globally, 56 percent of all survey respondents said they are more likely to divest as a result of an unpredictable landscape.

Further EY findings include: (i) 82 percent of companies said that macroeconomic volatility will increase the likelihood of them divesting over the next year; (ii) 48 percent of companies believe that tax-related divestment challenges have increased in the last 12 months; and (iii) 88 percent of companies have indicated that advanced analytics would help them make faster and better divestment decisions.

“In many cases, we are observing impulsive divestment decisions by companies feeling pressured by external factors to take quick action, often at the cost of realising maximum value," said Steve Krouskos, EY Global Vice Chair – Transaction Advisory Services. “The impact of too much speed on sale price is significant, and should motivate companies to be strategic and measured by prioritising value when navigating a sale process.”

The study also reveals that the current dealmaking is leading to senior executives craving “an information advantage”, with those not planning to divest in the next two years now looking to “evaluate their portfolios more rigorously”. Furthermore, 53 percent of executives made clear that understanding the business impact of new disruptive forces is among their “key portfolio review challenges”, and some even said it is “their biggest challenge”.

Paul Hammes, EY’s Global Divestment Leader, concluded: “We are seeing companies flee geographies because of short-term fears and wind up with suboptimal valuations on their business. Our survey finds that nearly half of companies plan to divest in the next two years. A divestment can empower a company to put capital to better use, enable a leaner operating model and enhance shareholder value.”

Report: Can divesting help you capitalize on disruption? – Global Corporate Divestment Study 2017

Standard Life and Aberdeen Asset Management in £11bn merger agreement

BY Fraser Tennant

In a deal that will lead to the creation of a world class investment group, Standard Life plc and Aberdeen Asset Management PLC, two of the UK’s biggest investment companies, have reached agreement on the terms of an all-share merger valued in the region of £11bn.

Described as having a compelling strategic and financial rationale due to the complementary strengths of the two firms (which oversee assets worth £660bn), the merger, once complete, will see Standard Life shareholders own 66.7 percent of the combined entity while Aberdeen shareholders will own 33.3 percent.

The boards of Standard Life and Aberdeen believe the merger will: (i) create an investment group with strong brands, leading institutional and wholesale distribution franchises, market leading platforms and access to longstanding, strategic partnerships globally; (ii) deliver through increased diversification an enhanced revenue, cash flow and earnings profile and strong balance sheet that is expected to be capable of generating attractive and sustainable returns for shareholders, including dividends; and (iii) result in material earnings accretion for both sets of shareholders, reflecting the significant synergy potential of the merger.

"We believe this merger is excellent for our clients, bringing together the strong and highly complementary investment capabilities of each firm with a breadth and depth of talent unrivalled amongst UK active managers and positioning the business to meet the evolving needs of clients and customers”, said Gilbert, chief executive of Aberdeen Asset Management PLC. “This merger brings financial strength, diversity of customer base and global reach to ensure that the enlarged business can compete effectively on the global stage."

To be headquartered in Scotland, the combined company will be branded to incorporate the names of both Standard Life and Aberdeen Asset Management.

"This merger brings together two fine companies and I'm greatly honoured to be asked to chair the combination”, said Sir Gerry Grimstone, chairman of Standard Life. “I look forward to welcoming our new colleagues. We will be successful as long as we continue to put our clients, customers, employees and good governance at the heart of what we do."

In addition, the merger is expected to harness Standard Life's and Aberdeen's complementary, market leading investment and savings capabilities which would deliver a compelling and comprehensive product offering for clients covering developed and emerging market equities and fixed income, multi-asset, real estate and alternatives.

Simon Troughton, chairman of Aberdeen, concluded: "The strategic fit is compelling and will facilitate significant investment in the business to support growth, innovation and a drive for greater operational efficiency.”

The Standard Life/Aberdeen deal is subject to a number of conditions, including shareholder approvals.

News: Standard Life and Aberdeen agree merger

Investors see UK as important for growth despite Brexit concerns, claims new report

BY Fraser Tennant

The UK is an important country for growth, with Brexit and uncertainty surrounding the future relationship with the EU doing little to deter investors, according to a new PwC report published this week.

The report, ‘Inside the mind of the investor… What’s next?: Global survey of investor and CEO views’, based on interviews and data from over 550 global investment professionals and over 1300 chief executives, reveals that the UK moved up from fourth place in last year’s survey to equal third with Germany this year, behind only the US and China. 

Other key findings in the report include: (i) London being viewed as the second most important city for growth prospects over the next 12 months, behind New York and followed by Beijing, Shanghai and San Francisco; (ii) investors focused on the technology and financial industries, putting the UK among the top three countries for growth; and (iii) 45 percent of investors and analysts say they were very confident about global economic growth (compared to 22 percent in the 2016 report).

“It’s striking that the UK is now seen as more important for growth, particularly by investment professionals, moving up from fourth place last year to joint third place with Germany this year,” said Hilary Eastman, head of global investor engagement at PwC. “Importance could be interpreted in a positive light – that the countries selected would be those expected to grow most or fastest.”

“On that basis, the Brexit vote and all the uncertainty surrounding the UK’s future relationship with the EU appear not to be deterring investors. However, some investment professionals saw that ‘importance’ could also be interpreted in a negative sense – that problems and greater volatility in the UK, for example, could have an important effect on slowing down companies’ growth.”

The report also notes that investment professionals perceive geopolitical uncertainty to be the top threat to company growth prospects, with protectionism, the future of the eurozone and social instability also ranked highly. In addition, almost one in five of think technology will completely reshape competition within five years, while 85 percent expect automation to reduce company headcount.

Ms Eastman concluded: “Investment professionals around the world are upbeat about global economic growth prospects, despite recognising the shifting political landscape in which companies operate. But investors do think it is becoming harder for business leaders to balance competing in an open global marketplace with trends toward closed national policies.”

Report: ‘Inside the mind of the investor… What’s next?: Global survey of investor and CEO views’