Tag Archives: Takeovers

Italian Government’s Golden Power Reformed: Towards Nationalization of Strategic Sectors? Not exactly.

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As announced in our previous blog post, the broadest powers to the Italian government in relation to M&A deals became fully effective as of yesterday.

The extension of the Golden Power regime has been approved together with other emergency measures to face the current COVID19 emergency, including massive injections of liquidity into companies that risk bankruptcy as a consequence of the continuing lockdowns (keep checking our website for the upcoming client alerts).

The declared goal of the new legislation is to protect the national strategic sectors from predatory acquisitions, which may be favored by the current market values, affected by the ongoing emergency.

In light of the European Commission guidelines of March 26, 2020 (providing guidance to the Member States on foreign investments, ahead of the application of EU Regulation 2019/452)  and in line with what is happening in other countries (e.g. Spain, France, Australia, Germany and the United States), the Law Decree of April 8, 2020, introduced:

1. The extension of the Golden Power regime to:

  • supply of critical inputs (including energy or raw materials, as well as food security);
  • access to sensitive information (including personal data) or the ability to control such information;
  • the freedom and pluralism of the media;
  • the financial and insurance sectors.

2. The obligation to notify relevant acquisitions also when the purchaser is a EU entity.

3. The specification of the thresholds triggering notification: for EU companies, a controlling participation (within the meaning of Section 2359 of the Italian Civil Code), while for extra EU companies, a participation of at least 10%.

4. The power of the Government to start on its own the Golden Power procedure, if the relevant entities do not comply with the notification obligations.

The extensions under numbers 1 to 3 above are temporary (the first one until a further decree is adopted and the second and third ones until December 31, 2020), while the one under number 4 has no deadline (so far).

No doubt that the above reform considerably increases State intervention in the economy. One could ask if – in short – the response to the virus would be the nationalization of the strategic sectors. Nevertheless, when asked, the Cabinet Undersecretary Riccardo Fraccaro stressed that “the intervention must be temporary and urged by an emergency. This is not a nationalization of the entire economy but a public intervention to protect specific areas”.

More Powers to the Government on M&A Deals Announced as a Response to the Italian COVID-19 Outbreak

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The Italian Government, through its Cabinet Undersecretary Riccardo Fraccaro, announced that stricter measures – that will impact on the acquisitions of Italian targets -are ready to be enacted within days, as a countermeasure to the feared speculative attacks to Italian businesses operating in strategic sectors.

The measures will be introduced through a reform of the Italian Golden Power regulatory framework.

Effective since 2012 – and very recently amended to face new challenges relating to the introduction of 5G technology – the Italian Golden Power rules essentially provide the Italian Government with the power to impede certain acquisitions and extraordinary transactions to protect Italian’s interests in strategic industries, through a system based on prior mandatory notifications to the Italian Prime Minister’s Office.

The reform announced in the past few days aims at avoiding that, on account of the economic crisis brought by the COVID-19 emergency, speculations and hostile takeovers will harm Italian interests in strategic industries.

The stricter measures announced include:

  • The possibility to exercise the Golden Power also in relation to transactions within the European Union.
  • The introduction of new industries to be considered as strategic, for the purposes of the Golden Power regulatory framework.
  • The possibility for the Italian Government to autonomously intervene and exercise the Golden Power, regardless of any previous notification to the Authorities.

Details and wording of the announced reform are likely to be officially presented and enacted within days, if not hours, and updates will follow (both on our blog and website).

Only then, a first assessment on their potential impact on what is likely to be a troubled market will be possible.

For now, let us just hope that what has been defined by the Italian Cabinet Undersecretary as a “vaccine for the hostile takeover virus” will not cause severe side effects on the Italian M&A market.