Anti-trust review is just another fact of life for large M&A deals, and now that China is a huge economy with a competition law in place (the Anti-Monopoly Law, or AML), everyone should get used to this kind of thing. But since it’s China, and because the AML is still relatively new, some questions will no doubt be raised about the Nokia-Motorola deal review and what, if anything, it means for the future.
These reviews can go in one of three directions: the deal is approved, it is approved conditionally, or it is rejected. Ordinarily I wouldn’t bother commenting on a review in progress, but this one has gone on a while, and the press is making noise.
Here is the latest from Bloomberg:
Nokia Siemens Networks, the network- equipment joint venture between Nokia Oyj (NOK1V) and Siemens AG (SIE), delayed the closing of its $1.2 billion purchase of assets from Motorola Solutions Inc. for a second time within three months.
The deal won’t be completed in the first quarter as the Chinese government hasn’t given antitrust approval yet, the company said today in a statement. The Chinese Ministry of Commerce has extended its review period for another 60 days, Motorola Solutions said in a separate statement.
Again, delays happen, nothing dramatic here. But later on in the Bloomberg piece, this caught my eye:
China may be using Motorola as a leverage point in the continuing controversy over the access of Chinese communications equipment suppliers to the U.S.,” said Daniel Hays, a Washington, D.C.-based partner with management consultants PRTM.
Huawei Technologies Co. said last month perceptions that the Chinese phone-network equipment maker threatens U.S. national security are unfounded. Huawei’s comments came a week after the company withdrew its purchase of Santa Clara, California-based 3Leaf Systems’ patents, in compliance with a recommendation by the Committee on Foreign Investment in the United States.
OK first, I should point out that the above quote was from some management consultant in D.C. Not someone at one of the companies, or even a government official. So I could just ignore it.
Unfortunately, it looks like at least some in the media will be reporting on the delay within the overall context of Motorola’s dealings with China telecom firm Huawei, both in terms of this deal as well as Huawei’s recent troubles with US overseas direct investment.
Here’s what the Wall Street Journal had to say:
The 60-day extension by China’s Commerce Ministry was the latest in a series of tussles between U.S. and China in the telecommunications sector. A U.S. panel that vets deals with national-security implications last month forced Chinese telecom-equipment maker Huawei Technologies Co. to unwind a $2 million deal for technology company 3Leaf Systems. Huawei and Motorola, meanwhile, are tangled in a pair of lawsuits over intellectual property.
Tussle between the US and China? Huh? This is a competition law review that isn’t even complete, not a bilateral dispute between two governments.
What’s the implication that’s being made here? The consultant in the Bloomberg piece is pretty clear, saying that Beijing is using the AML review process to play tit-for-tat on behalf of Huawei. The Wall St. Journal article is not quite as blunt, although half of the article is devoted to the Huawei end of things — the author either ran out of things to say or wanted readers to connect the dots.
This is inflammatory stuff. At this point, there is no evidence that this AML review delay is reciprocity for America’s latest rejection of a proposed Huawei acquisition. Is it possible? Sure. But without a quote or three from folks with direct knowledge, this kind of implication is perhaps better suited to the editorial page, or omitted entirely.
If it is true, this would be big news. Western doomsayers have been waiting for China to use the AML, and other processes such as the new security review mechanism, on behalf of Chinese enterprises. I disagree. I don’t think we’re going to see a wave of AML-based protectionism and have criticized Western commentators who have been predicting the worst. It looks as though this deal will eventually go through, perhaps with some conditions that the parties can accept. However, if the review picks up a whiff of politics about it, it will no doubt make a lot of M&A folks nervous.
This is a very sensitive topic. Best to leave the wild accusations aside until the facts are in.