Poland has approved new rules aimed at making it difficult for non-EU investors to take over domestic strategic companies flattened by Covid-19. The move is part of a government rescue package worth more than 300 billion zlotys ($78.43 billion) aiming to help the country survive the deteriorating economic situation due to the pandemic.
The new regulations would be binding for two years and would apply to public companies, producers of software used in power plants, transportation and health systems, and companies in the energy, telecoms and defence sectors whose revenues have exceeded 10 million euros in either of the two financial years before the planned acquisition.
“We are saying clearly: Poland is not for sale in this crisis situation,” Poland’s deputy prime minister and development minister Jadwiga Emilewicz told Polskie Radio in April. “Polish companies, often family-owned, which over the last 20 to 30 years have painstakingly built up their brand, their reputation and contributed to the strength of the Polish economy, cannot today become cheap booty for funds, especially from outside the EU.”
(Poland’s deputy prime minister and development minister Jadwiga Emilewicz)
Poland is not alone in looking for ways to block foreign takeovers of domestic companies whose valuation has fallen due to the coronavirus-driven crisis. Similar measures were taken by other European countries since the world economy after COVID-19 is dampened, cheapening acquisition prices.
Earlier in April Germany stiffened defenses of businesses vulnerable to bargain hunting, approving changes to its Foreign Trade and Payments Act while Italy extended “golden powers" of intervention in foreign direct investments involving companies operating in the sectors of defence, national security, communications, energy and transport.
In Italian legislation, “golden power” is defined as the power guaranteed to public authorities to intervene in market transactions that concern companies that qualify as strategic.
Hungary's government, in a decree published on May 26, stipulates that foreign investors undertaking deals worth more than one million euros in businesses deemed strategically important will have to apply for a permit to acquire more than 10% of a local company. The term “foreigner” applies to natural persons and legal entities from outside the EU, the European Economic Area (EEA) and Switzerland.
The takeover decree will be in effect until the end of 2020 and concerns sectors like healthcare, tourism, energy, food production, waste management, construction, finance, shipping, defence, communication and information technology.
In March, the European Commission, the EU's executive arm, issued guidelines to ensure a strong EU-wide approach to foreign investment screening "in a time of public health crisis and related economic vulnerability".
"As in any crisis, when our industrial and corporate assets can be under stress, we need to protect our security and economic sovereignty," Commission head Ursula von der Leyen said.
New foreign direct investment screening regulations were adopted last March and can be fully applied from October 2020.
Some experts argue that richer countries like Germany and France should coordinate their policy with weaker EU member states that don't have the resources to prevent such bids.