US economy

A guide to China’s stealthy chip dealmaking in Europe


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The technology battle between the world’s two largest economies hit fever pitch this week when the US attorney-general accused China’s Huawei of stealing American technology and breaking US sanctions.

Underlying the increasingly volatile tensions is the fear among US policymakers that China is getting its hands on sensitive, weapons-grade technology that will later be handed over to the People’s Liberation Army.

US officials have long claimed that Huawei is linked to the Chinese military. The new charges of corporate espionage, according to the US, relate to Huawei’s alleged attempts to steal the technology used by T-Mobile, one of its US business partners, in a robot called Tappy, which was used to test mobile telephones.

But the technology war hasn’t just raised questions about stealing corporate secrets. It has also brought attention to how the state buys up as much critical foreign technology as possible without tripping national security checks.

In an FT deep dive into the tangle of technology funds in China, Emily Feng in Beijing has explained how Chinese state-backed investors managed to acquire cutting-edge European technology and bring it to China. Read her story here.

The case centres around Sweden’s most notable deals of late: the stealthy acquisition of Silex, a major global semiconductor maker, by a Chinese navigation start-up called NavTech.

NavTech did not purchase Silex outright. Instead, a subsidiary of a Chinese state-run semiconductor fund first acquired Silex through an investment holding company. Less than half a year later, NavTech bought the investment holding company, GAE Ltd, and by extension, Silex.

The deal shot the then-unknown NavTech into the upper-echelons of the navigation and mapping business in China and gave it crucial technology to begin building its own foundry in Beijing, funded, not coincidentally, by the same state-run semiconductor fund.

The complexity of the deal raises questions about how the EU can better analyse inflows from the “spaghetti bowl of capital looking to do deals”, as one analyst puts it, to protect critical technology.

Regulators may focus on cases such as Huawei but the Chinese government has already figured out how to buy the chip technology without breaking a single law.

The situation reminded DD of another tale that has lingered in our minds for a little while from last year when Chinese state-backed semiconductor company Tsinghua Unigroup agreed to buy French chipmaker Linxens from private equity firm CVC, in a $2.6bn deal that neither company announced.

SCOR settling in Paris

The takeover battle between French insurers Scor and Covéa has turned even more nasty than it was before, with Scor (the target) saying it plans to take legal action against Covéa (the potential bidder).

The DD write-up is brought to you by Oliver Ralph, the FT’s insurance correspondent who is following the story closely. 

The story so far: Covéa is a mutual insurer with an 8 per cent stake in Scor, a big reinsurance company with a market capitalisation of over €7bn. Covéa’s chief executive, Thierry Derez, used to be on the Scor board.

Last August, Covéa made an informal bid approach for the company. Scor and its charismatic chief executive, Denis Kessler,pictured, forcefully rejected it. Among all the rancour, Derez left the Scor board in November.

Fast forward to Tuesday. First, Covéa said it was no longer interested in buying Scor. “The continued attacks and hostile tactics targeting Covéa . . . have intensified in the last few days. As a consequence, Covéa states that a transaction with Scor is no longer part of its strategic options,” it said in a statement.

That sent Scor’s shares down by 13 per cent at one stage.

The reinsurer hit right back though. In a statement it noted its “surprise and astonishment” that Covéa had made its announcement during working hours and said it would bring the matter to the attention of the French markets regulator, the AMF.

Scor went on to say that it planned to launch legal action against Derez and Covéa for alleged “breach of trust” and “concealment of breach of trust” respectively. Scor is also pursuing a complaint against Covéa’s advisers, Barclays and Rothschild, both of whom declined to comment.

Covéa issued a statement late last night saying it “has taken note of the press release issued by SCOR today and strongly denies all of the allegations contained in it. Covéa will hold a board meeting [Wednesday] and reserves all rights to protect its interests in view of these serious and unfounded accusations which are harmful to its reputation.”

Here’s our latest story if you’d like to read more. 

Orcel watch

You didn’t think Andrea Orcel was just going to fade away from the spotlight just like that, did you?

The former head of UBS’s investment bank is preparing to mount legal action against Santander after the Spanish bank rescinded its offer to make him chief executive, our colleagues report here citing sources.

Orcel has approached several lawyers in Spain, where a breach of contract case is likely to be brought and is close to hiring representation. But there is a snag.

The Italian banker and rainmaker is having trouble finding a top-notch law firm in Spain to work with him, one person said. The reason? It’s hard to find one that hasn’t previously worked with Santander.

What’s Orcel seeking and how strong is his potential case? Read the full story here

Job moves

  • JPMorgan Chase has reshuffled several senior roles in its European investment bank, according to an internal memo reviewed by DD.

    • David Lomer, who co-runs M&A in the region, becomes co-head of banking in the UK and Ireland.

    • Ina De, who previously held the role, will become co-head of the bank’s strategic investors group in the region.

    • Dwayne Lysaght takes Lomer’s former role as co-head of M&A with Dirk Albersmeier.

    • Axel Beck has become co-head of Nordic banking, while Bo Zethraeus will become a vice-chair of investment banking for the Nordics.

    • Harry Hampson adds the role of vice-chair of JPMorgan Cazenove to his existing responsibilities.

  • Evercore has hired John Startin as senior managing director in its New York office. He will lead its metals, materials and mining group. He joins from Goldman Sachs, where he was a managing director. 

  • King & Spalding, a law firm, has hired Alan Noskow as a corporate partner. He joins from Manatt, Phelps & Phillips.

  • Campbell Lutyens, an advisory firm, has hired Suvir Varma to its advisory board. He joins from Bain & Company.Before that, he worked at AT Kearney.

  • KKR partner Jamie Weinstein is leaving the private equity firm at the end of March, Bloomberg reported. He oversaw more than $8bn as co-head of special situations.

  • Nomura plans to cut as many as 50 employees from its global trading division as the Japanese bank trims underperforming staff. The redundancies will fall heaviest on Europe, with fixed-income desks bearing the brunt of the cuts. Read more here.

Smart reads

High-flying Elon Musk The Tesla chief executive’s corporate jet logged more than 150,000 miles last year, shuttling him around the world for both work and leisure. It creates an awkward dynamic for Musk, who has called fossil fuels “the dumbest experiment in human history”. (WaPo)

Indonesian workaround A number of connected companies has sued a subsidiary of Lippo, the powerful Indonesian conglomerate controlled by the Riady family. The move has raised serious alarms over whether Lippo has been able to manage its own bankruptcy and has cut out a foreign investor from the process. (FT)

AT&T has a $49bn problem The US wireless provider last year completed its protracted takeover of entertainment giant Time Warner. But as it focuses on growing its streaming entertainment business, AT&T unit DirecTV has become a drag. (WSJ)

Technology doesn’t have the fix Billions of dollars have flowed into tech companies focused on the housing market, but none have yet been able to tackle issues of cost. Policymakers warn that the housing crisis is something technology probably can’t solve. (NYT)

News round-up

Pinterest hires Goldman and JPMorgan Chase for its IPO (FT)

Another M&A deadline gets postponed due to US shutdown (Reuters)

Denmark proposes tougher penalties for bankers (FT)

Norwegian announces rights issue amid finance worries (FT + Lex)

Total and Cnooc make huge UK offshore gas discovery (FT)

Asian business drives record sales and earnings for LVMH (FT)

PG&E files for bankruptcy protection after wildfires (FT)

Barclays executive pushed for Qatari deal bonus (FT)

GameStop pulls plug on sales process, shares tumble (FT)

T-Mobile to defend Sprint deal before Democratic-led House (BBG)

Lloyd’s chief lays out plans to rejuvenate market (FT)

Volkswagen aims for Traton truck IPO in April (Reuters)



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