Australia has blocked an A $ 300 million takeover bid by a Chinese state-owned company for a local construction contractor, reflecting intense diplomatic and trade tensions between Beijing and Canberra.
The decision to prevent the China State Construction Engineering Company from acquiring Probuild for “national security” reasons is the first negative assessment made by Canberra since the entry into force of new strict rules on foreign investment (Firb) on the 1st. January.
The regulations give Canberra greater powers to review proposed investments in sensitive sectors by foreign bidders, monitor compliance with government approval conditions and order divestments.
Experts said the decision to block such a relatively small acquisition sent a clear signal to Chinese investors that Australia’s M&A approvals now face significant hurdles.
“The rejection by the treasurer of the takeover bid for South African company Probuild by the China State Construction Engineering Corporation is a sign of a more rigorous review of Chinese investments under the new Firb regulations which now include national security as a specific part of the screening process, ”said Hans Hendrischke, professor of Chinese business and management at the University of Sydney Business School.
Professor Hendrischke said the CSCEC may have been blocked by Canberra due to Washington’s August decision to put it on the list of “Communist Chinese military enterprises” and to ban U.S. investors from holding its shares. CSCEC is the world’s largest construction company in terms of turnover.
The CSCEC did not respond to requests for comment.
Chinese investment in Australia has fallen dramatically since bilateral relations deteriorated following Canberra’s decision to ban Huawei from supplying 5G equipment, its introduction of foreign interference laws and calls for an investigation. on the Covid-19 epidemic in Wuhan.
A joint report from the University of Sydney Business School and KPMG found that Chinese companies invested AU $ 3.4 billion ($ 2.6 billion) in 2019, down 58% from compared to A $ 8.2 billion a year earlier.
Australia’s hard line on Chinese investment reflects a much tougher approach Washington has taken towards Beijing. However, he contrasts with Europe’s more modest approach and the decision to sign an EU-China investment agreement last month.
Josh Frydenberg, treasurer of Australia, declined to comment on Canberra’s decision.
Probuild’s parent company, Wilson Bayly Holmes-Ovcon, revealed to the South African stock exchange that a potential acquirer has withdrawn its offer on Probuild following Canberra’s advice that it will reject its application on “security grounds”. national ”. People with knowledge of the deal confirmed to the Financial Times that the bidder was CSCEC.
Simon Gray, executive chairman of Probuild, blamed “politics” for Canberra’s decision to torpedo the deal, telling the Australian Financial Review that Probuild had undertaken less sensitive work than rival John Holland, which had been acquired. by China Communications Construction Company for A $ 1 billion in 2015.
“It’s more political than anything else. . . No one can give us a real reason why we are a risk to national security. It’s a joke, ”Gray said.
Australian businesses are growing more and more nervous on Canberra’s crackdown on Chinese investment, fearing it might prompt Beijing to impose more trade sanctions on Australian goods. However, the government insists it will not trade its sovereignty in its handling of relations with China.
In August, Mr. Frydenberg blocked China Mengniu proposed $ 600 million buyout by Lion Dairy, which was owned by Japan’s Kirin Holdings