Takeover battle: Germany to create fund to foil foreign takeovers

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Takeover battle: Germany to create fund to foil foreign takeovers


Germany calling: Berlin is moving away from principles that said the free markets should decide winners and losers, with the state ensuring fair competition
Germany calling: Berlin is moving away from principles that said the free markets should decide winners and losers, with the state ensuring fair competition

Germany plans to pass legislation by the end of 2019 to create a state-owned fund that can protect key companies from takeovers by Chinese and other foreign firms, government sources said, in a marked shift from its “hands-off” approach to business.

Economy Minister Peter Altmaier proposed the fund in February as part of a more defensive industrial strategy and three officials told Reuters the government was now working on draft laws so the fund could be up and running next year.

Two senior government officials, who spoke on condition of anonymity, said the idea was for the state-owned investment fund to work with the private sector when buying company stakes to foil unwelcome takeovers.

One official said the state could buy a stake initially and then sell it on as soon as possible to private investors while the other official said in some cases the fund could work with private investors from the start. “In the past, Germany was too reluctant to define its national interests. This is changing now,” the first government official said. “We see that we cannot lean back anymore and let everything be decided by the free play of market forces,” he said. “And this means more protection from the state.”

Long an ardent advocate of free markets, Germany’s move is a response to China’s state-driven metamorphosis from customer to competitor and US President Donald Trump’s threats of unilateral trade sanctions and higher tariffs, the sources said. For decades, German politicians followed the ‘ordoliberal’ principles of post-war economy minister Ludwig Erhard who said free markets should decide winners and losers, with the state ensuring fair competition.

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Reuters

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