Representative Rosa DeLauro (D – Connecticut) intends to introduce a bill before the 114th Congress that will broaden the powers of the Committee on Foreign Investment in the United States (CFIUS), a United States government committee tasked to review business transaction that result in foreign ownership of US corporations. At present, CFIUS is directed to review transactions to determine whether national security concerns would exist as a result of a merger or sale. The bill seeks to broaden this review to include a determination of whether “such transaction is to the net benefit to the United States.” This would require CFIUS to perform analysis as to the proposed deal’s effect on employment, innovation, and public health and safety, in addition to national security.
Although the bill does not directly target Chinese acquisitions of US corporations, the revisions proposed to CFIUS review could have a significant effect on the US-Chinese acquisition market. CFIUS has reviewed many proposed deals that involve a Chinese corporation acquiring a US corporation under the current national security review framework, resulting in the rejection of several offers. The mere declaration that a transaction will be subject to CFIUS review has resulted in the withdrawal of several offers. Expansion of the review of Chinese-US transactions could have a chilling effect on the pursuit and consummation of such deals.
The bill faces an uncertain path to passage by both houses of Congress and receipt of the signature of the President. Rep. DeLauro previously introduced a bill with similar requirements that failed to make it out of committee. However, increased scrutiny of transactions with foreign entities by members of Congress could generate bi-partisan support for the measure.
Peter Almaas is responsible for the content of this Short Take.
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