Fosun International Ltd has agreed to acquire German company FFT GmbH, which sets up and runs automated production lines manufacturing goods ranging from cars and aerospace parts to washing machines. Though not involved in sensitive military applications or critical infrastructure, the deal could still potentially be reviewed by the German Federal Ministry for Economic Affairs and Energy, led by Peter Altmaier from Angela Merkel's Christian Democratic Party (CDU). Fosun notes that completion of the transaction is subject to regulatory approvals. The acquisition price has not been disclosed.
Germany has signalled a tougher line on inward M&A from China, and in 2017 amended its Foreign Trade and Investment Law. Any acquisition of more than 25% of a company by investors located outside of the EU can be reviewed. The ministry can decide to conduct a review within three months of a deal being announced.
Shanghai Stock Exchange listed Fosun says that the acquisition of FFT supports Fosun's strategy of investing in companies which support what it terms as "makers", and have strong market positions. The acquisition will help Fosun upgrade its capacity to offer new manufacturing solutions for its own portfolio of companies, such as Nanjing Nangang Iron & Steel United, Eurocrane and Zhejiang XCC Group.
Guo Guangchang, chairman of Fosun International, comments that creating better products and services to customers through intelligent manufacturing and technology innovation is key. It will work closely with FFT, offering Fosun's "makers" resources, and access to China's booming market, while supporting Fosun's increasing role in the evolution of global smart manufacturing.
"For us, this is a logical step to expand our global profile and strengthen our presence in China with the support of their local network and knowledge", adds Manfred Hahl, CEO of FFT. "China, as one of the largest markets in the world, offers significant growth potential in the automotive sector as well as many other industries and applications. The partnership with Fosun provides us with access to a worldwide network. Our team is convinced that we will continue to establish FFT as a leading turnkey partner under our new owner."
FFT is set to be acquired from ATON GmbH, a German family-owned private investment company, through funds managed by subsidiaries of Fosun International. Founded in 1974 and headquartered in Fulda, 100 kilometres east of Frankfurt, FFT provides flexible automation turnkey solutions, customized engineering designs, and smart factory solutions for well known original equipment makers (OEMs) in Germany, the US, Japan, China and other countries.
It takes responsibility for setting up complete production plants, for example putting in place robotic car production lines. FFT says that it has the potential to expand the use of its capabilities in numerous sectors outside of the automotive industry, as proven during its expansion into white goods such as washing machines. FTT is also active in aerospace industries, such as providing equipment and carbon fibre assembly systems.
In 2017, FFT recorded revenues of over Euro 856 million, and employed over 2,600 people.
Fosun was founded in 1992 and is listed on the Shanghai Stock Exchange. Fosun International Limited has been listed on the Hong Kong Stock Exchange since 2007. Though FFT is neither involved in critical infrastructure nor sensitive military technology, it is not a formality that the deal will be waved through by the German authorities, which continue to complain about what they view as restricted access to the Chinese market for German companies.
In July 2017 the German cabinet adopted the 9th Ordinance amending the Foreign Trade and Payments Ordinance, introducing stricter rules for the scrutiny of corporate acquisitions by investors from outside the European Union (EU). The economics minister at that time, Brigitte Zypries, noted that in recent years there had been a big increase in the number and complexity of corporate acquisitions. So Germany had widened the scope of sector-specific scrutiny and included certain types of critical infrastructure. "We continue to be one of the world's most open economies, but we want to make sure that competition is fair," she said at the time. "We owe that to our companies. Many of them are facing competition from countries whose economic system is not as open as ours. In future, reporting requirements and adequate scrutiny periods will deliver better protection and greater reciprocity for companies with critical infrastructure."
Under the new rules, the acquisition of a shareholding of at least 25% in a German company by investors from outside the EU and the European Free Trade Association (EFTA) can be scrutinized by the Economic Affairs Ministry. The review considers whether the acquisition poses a threat to public policy or public security in Germany. In particularly sensitive security-related areas, like military equipment and cryptotechnology, all foreign investments are scrutinized to see whether essential security interests are affected. Germany at the same time launched an initiative at EU level together with France and Italy to change EU law. In September 2017 there was a joint announcement from Germany, France and Italy welcoming an EU proposal on investment vetting as an important step in ensuring a level playing field in Europe and better protection amid corporate acquisitions.
The European Commission presented initial proposals for establishing a legal basis in European law to give member states the ability to intervene in individual cases of foreign direct investment in strategic assets, particularly if done by state-controlled or state-financed enterprises. That legislative package is being worked on.
At the time Zypries, economy minister, commented that Germany greatly welcomed the proposals made by the European Commission President Juncker. "We are highly interested in foreign investment when it takes place under market conditions," she said. "But we need to prevent other states from taking advantage of our openness in order to push through their industrial policy interests."
The German government is also looking at making further amendments to its foreign investment laws, which would strengthen reporting requirements in the case of foreign investors building up hostile stakes in German companies. This was prompted by the move early in 2018 by Chinese auto maker Geely, which surprised Daimler by revealing that it had built up a 9.69% stake in the company. The German government can review foreign investments of 25% or more, but this threshold might be cut.
