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Brussels is launching its first anti-subsidy probe into foreign buyers of EU assets, using new powers to investigate a multibillion-euro telecoms deal involving an acquirer from the United Arab Emirates.
With the bloc tightening scrutiny of overseas investment flows, the European Commission will this week open a formal in-depth probe into e&’s proposed acquisition of Czech PPF group’s telecoms assets in Bulgaria, Hungary, Serbia and Slovakia.
While the precise timing remains uncertain, the announcement of the investigation is expected to come in as early as Monday, according to three people with direct knowledge of the case.
Telecoms group e&, which was formerly known as Etisalat and is majority owned by the UAE government, clinched a €2.2bn deal to buy the assets last August and the proposed deal has won approval from national competition regulators.
But the commission is concerned the Abu Dhabi-based company received state funds, amounting to unfair subsidies, in order to complete the deal. It has also questioned whether state funding could help the company outperform EU rivals, undermining competition.
In order to open an in-depth probe of this kind, the commission would need to have found indications of subsidies that would distort the market, said people familiar with the investigation.
Etisalat is expected to argue it has received no state support from the UAE and there were no state subsidies that would undermine Etisalat’s rivals, two of these people said. Etisalat, PPF and the commission declined to comment.
Foreign buyers of EU assets have never before been subject to restrictions similar to the bloc’s state aid regime, which aims to police public support so member states do not give financial advantages to national companies.
The EU’s foreign subsidies regulation was passed last year to ensure that companies outside the bloc also avoid having an unfair advantage from cash-rich governments such as China when buying European assets.
“This is the first use in an acquisition of the important new powers under the foreign subsidies regulation. Until now state aid rules have applied only to EU governments,” said Alec Burnside, a Brussels-based partner at law firm Dechert.
To date the cases launched under the foreign subsidy regime have only targeted Chinese companies in situations relating to bidding for public contracts or direct subsidies. The Etisalat probe would also be the first time the EU is using its powers to scrutinise the acquisition of assets.
Last month two Chinese bidders pulled out of a tender to supply a solar park in Romania after Brussels had opened an in-depth investigation into the two consortiums bidding for the development.
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