The UK has, in recent years, been weak in protecting homegrown companies from acquisition in order to safeguard strategic national interests, as the sale of global processor IP giant to Softbank of Japan demonstrated in 2016. Perhaps belatedly, the country has introduced new security legislation to protect such interests, which has led to probes of two recent deals – the purchase of an 18% stake in BT by French billionaire investor Patrick Drahi; and the 2021 sale of a semiconductor plant, Newport Wafer Fab, to Nexperia of The Netherlands, which is 100% owned by Wingtech of China.
BT shares fell in value by 5% on the news that a full investigation will be held into Drahi’s holdings in BT, which French/Israeli industrialist Drahi, who controls France’s Altice Group, bought via his British vehicle Altice UK. It has been widely rumored that Drahi might use his stake, which he increased to 18% at the end of 2021, as the springboard to buy yet more shares and mount a hostile takeover bid.
The investigation into Drahi’s stake relates only to the most recent 6% he bought in December. The billionaire formed Altice UK in June 2021 to take an initial 12.1% stake, for which he paid about £2bn, making him BT’s largest stakeholder. Despite his denials of being interested in takeover, BT started building defences against a potential bid,
hiring advisory firm Robey Warshaw LLP to work alongside Goldman Sachs. In June 2022, Drahi would once again be permitted to increase his stake in BT (which is allowed every six months).
The probe was initiated by the UK business secretary of state, Kwasi Kwarteng, under the provisions of a new National Security and Investment Act that came into effect in January 2022. It may well look like bolting the stable door after the horse has bolted, in the case of these two deals, but the law allows the government to intervene to block acquisitions of UK companies deemed to be of strategic importance to national security, including the incumbent telco. The same powers exist for any case where a single investor takes a stake of 25% or more in a strategic company.
Kwarteng has also ordered a “full national security assessment” of last year’s £63m acquisition of Newport Wafer Fab, Britain’s biggest microprocessor manufacturer, by Nexperia. In theory, the government could force the reversal of the deal, although Nexperia’s Chinese owners will have had full access to any intellectual property by now.
Newport Wafer Fab holds multiple government contracts, some of them related to defense and national security activities..
The investigations will take up to 30 working says, which can be extended to 75 days.