France extends tougher screening on foreign investments through 2021

The French government will extend through 2021 a lower threshold for screening non-EU investments in listed French companies that was put in place during the coronavirus crisis and was due to expire at year end, the Finance Ministry said on Friday.

The government temporarily lowered in July the threshold above which investors from outside the European Union buying stakes in listed French companies must seek its approval, to 10% from 25% previously.

“In this time of economic crisis, we must guarantee the protection of our strategic companies. We will therefore maintain the 10% threshold for screening foreign investments in France,” Finance Minister Bruno Le Maire said in a statement.

The measure was due to expire at the end of this year, but the Finance Ministry said it would be extended until the end of 2021.

President Emmanuel Macron’s pro-business government, which has otherwise encouraged foreign investment, lowered the threshold over concern that market volatility resulting from the pandemic and a drop in the valuation of some French companies could expose them to hostile takeovers.

Once the Treasury is notified of an intent to acquire a stake of more than 10%, it has 10 days to decide whether a more in-depth review is needed. Such a review can lead to the deal being rejected.

The government has rarely used its authority to block deals, although U.S. conglomerate Teledyne dropped plans this year to buy French night vision firm Photonis in the face of French government opposition.

The French measure is part of a broader push among European countries this year to step up screening of investments from non-European countries that could lead to foreign firms taking control of sensitive technology.

Lawyers have said the moves would make mergers and acquisitions in Europe more complicated and some U.S.-based activist hedge funds expressed frustration with the tougher measures.

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