Regulatory Hurdles Facing Mergers With Chinese State-Owned Enterprises
Acquisitions by Chinese state-owned enterprises (SOEs) of companies in the United States (US) and European Union (EU) have grown in recent years. Trade and cross-border investment has increased and Chinese SOEs have extended their reach beyond their domestic market. Those acquisitions, together with joint ventures between Western companies and Chinese SOEs, have attracted substantial attention from the general public and from scholars. Transactions with Chinese companies often generate headlines and attract political attention. Transactions with Chinese SOEs tend to attract even greater scrutiny, and often face special merger control and foreign investment rules. Those rules have been subject to recent changes as Western governments have increasingly confronted such deals. Chinese SOEs and the companies considering entering into mergers with them should be prepared for the regulatory hurdles such transactions face.
The present article explores the potential stumbling blocks for transactions with Chinese SOEs imposed by the merger review rules of the US Hart-Scott-Rodino Antitrust Improvements Act (HSR Act) and the European Union Merger Regulation (EUMR), as well as the reviews of the Committee on Foreign Investment in the United States (CFIUS). It begins by providing background on SOEs generally and Chinese SOEs in particular, and a brief history of the investments made by such enterprises in the US and Europe. The paper then discusses the regulatory framework and the hurdles transactions by and with SOEs face in the US under HSR, with special emphasis on the reviews of the CFIUS, and in Europe, as well as the practical considerations that entities engaging in such transactions should keep in mind.
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