On March 31, 2020, French Economy Minister Bruno Le Maire verbally notified US defense manufacturer Teledyne that it would block U.S. conglomerate Teledyne’s proposed acquisition of French night vision startup Photonis.[1] This will be the first use by the Economy Ministry of its veto powers over transactions in strategic industries under the French foreign investment control regime.

Since 2014,[2] the French Minister of Economy has the power to veto mergers in strategic industries, such as energy, water, transport, telecommunications, and public health. Under the current foreign investment control regime, the takeover by a non-EU foreign investor of any sensitive French company is subject to prior authorization by the Economy Ministry when the foreign investor crosses the threshold of 25% of voting rights within the company. In 2019,[3] the Pacte Law n°2019-486 strengthened the Economy Ministry’s prerogatives and extended them to additional sectors, including artificial intelligence, data storage and connected devices, and the space industry. In the context of the COVID-19 outbreak, the Economy Minister further added the biotechnology sector to the list of “critical technologies” subject to prior approval under the foreign investment control regime.[4]

Teledyne had announced earlier this year that it was in advanced discussions to acquire Photonis, currently predominately owned by the French investment fund Ardian, for c. €500 million. The transaction was however subject to foreign investment approval in France. The Ministry’s main concern is that the proposed transaction would harm French technological sovereignty,[5] as Photonis designs and manufactures state-of- the-art image intensifier tubes for military, space, and commercial applications. More generally, the French Minister of Economy warned against the increased risk of foreign investments in French industrial and technological assets during the COVID-19 crisis.[6] The Economy Ministry has yet to issue its formal, written decision, which may be delayed due to the COVID-19 outbreak.

The Economy Minister also announced that it would lower the shareholding threshold to 10% for investments by non-EU investors into publicly- listed companies. The revised threshold would be in place until the end of 2020.[7]

[1]              See Teledyne’s Report, Form 8-K filing to the U.S. Securities and Exchange Commission of March 31, 2020, Item 8.01 “Other Events”, available at: https://www. sec.gov/ix?doc=/Archives/edgar/data/1094285/000109428520000054/tdy-20200331.htm.

[2]              See Decree n°2014-479 of May 14, 2014, which expanded the list of sectors in which foreign investors must seek prior authorization from the French Minister of Economy.

[3]              Introduced by Law n°2019-486 of May 22, 2019, on Business Growth and Transformation, so-called “Pacte Law”.

[4]              See Order of April 27, 2020 on foreign investment in France.

[5]              See Mlex’s Report, “Teledyne-Photonis defense merger to be blocked under French strategic veto powers” (April 6, 2020), available at: https://www.mlex.com/ GlobalAdvisory/DetailView.aspx?cid=1177023&siteid=442&rdir=1

[6]              See Mlex’s Report, “France to boost merger-veto powers to block hostile takeovers during Covid-19, Le Maire says” (April 29, 2020), available at: https://www. mlex.com/GlobalAdvisory/DetailView.aspx?cid=1182807&siteid=225&rdir=1

[7]              See press release from the General Directorate of the Treasury available at: https://www.tresor.economie.gouv.fr/Articles/2020/04/30/covid-19-update-of-the- foreign-direct-investment-screening-procedure-in-france.