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Australia tightens investment rules on foreign takeovers

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Australia has temporarily tightened its foreign takeover rules, fearing that strategic assets may be sold at low prices due to the coronavirus crisis.

The movement follows warnings backbench MPs afflicting aviation, cargo and healthcare companies could become vulnerable to takeovers of state-owned enterprises under authoritarian regimes, including China. It follows a similar EU warning last week.

Josh Frydenberg, the treasurer of Australia, said on Monday that all foreign buyout and investment proposals would now be examined by the foreign investment review committee, to protect domestic interests. Previously, Canberra did not examine most foreign takeovers of private companies unless they were worth more than A $ 1.1 billion.

“These are extraordinary times and we have seen the value of Australian companies, in fact around the world, being severely diminished because of the coronavirus and we do not want predatory behavior that is not in the national interest to take place. happen, “said Frydenberg. . He denied that the measures target China.

The temporary regulatory changes will apply to all new overseas investment proposals as well as those currently in progress. The government has also extended the deadline for reviewing agreements from 30 days to six months.

“Cross-border transactions in strategic areas such as the manufacturing of health products may be subject to further scrutiny, face an extended approval process and could potentially be blocked if found to be contrary to Australian national interest at this very sensitive and volatile time, “said Kate Jefferson, corporate partner at Baker McKenzie law firm.

Last week Andrew Hastie, a government member who chairs Parliament’s Intelligence and Security Committee, warned that authoritarian states would seek to “recover distressed businesses and assets” essential to global supply chains.

Concerns about foreign acquisitions of companies whose valuations have been affected by the coronavirus epidemic have become a global problem.

Ursula von der Leyen, president of the European Commission, last week urged EU states to protect critical businesses from foreign takeovers that “could undermine.” . . security or public order ”.

Richard McGregor, an analyst at the Lowy Institute, said Australian rules appear to target Beijing state-owned enterprises, but may also trick investors from other regions.

“Vultures come in many forms and I think it will end up being applied to many more companies than those in China,” said McGregor.

Chinese investment in strategic sectors has become an increasingly sensitive issue in the West amid concerns over the global ambitions of Chinese President Xi Jinping.

Some analysts have speculated that Beijing will emerge stronger from the coronavirus given its success to date in preventing the spread of the epidemic, which originated in Wuhan, and the severe damage caused by the pandemic in the United States. United and in other parts of the world economy.

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