Poland’s government won praise for the early steps it took to help companies stricken by the pandemic. But among the next round of measures being drawn up to deal with the economic fallout is one that is worrying business leaders: a plan to allow regulators to block foreign takeovers of Polish companies.
The details have yet to be finalised. But according to a draft seen by the Financial Times, the government is considering giving the country’s competition authority the power to block non-EU companies from taking stakes of more than 10 per cent in businesses deemed to be providing critical infrastructure, goods or services for a period of two years.
“We are saying clearly: Poland is not for sale in this crisis situation,” Poland’s deputy prime minister and development minister Jadwiga Emilewicz told Polish radio last month. “Polish companies, often family-owned, which over the last 20 to 30 years have painstakingly built up their brand, their reputation and contributed to the strength of the Polish economy, cannot today become cheap booty for funds, especially from outside the EU.”
Poland is not alone in looking for ways to block foreign takeovers of companies flattened by Covid-19. Amid concerns that Chinese state-owned groups could exploit the crisis to snap up European groups on the cheap, the EU’s competition chief told the FT last month that the European Commission would have no problem with EU states taking stakes in companies to stave off the threat of Chinese takeovers. Meanwhile, Germany has launched a €100bn bailout fund that will recapitalise and take stakes in German companies laid low by the crisis.
There are also reasons why Polish groups might be easier targets than those in western Europe. The fact that most Polish companies were founded in the 30 years since the collapse of communism means that they tend to be younger, and therefore smaller than peers elsewhere in Europe. They are also currently cheap: falls on the Polish stock exchange — the blue-chip index has lost almost a quarter of its value since mid-February — have been amplified by the drop in the Polish zloty, which has lost about 8 per cent against the dollar and renminbi since the start of the crisis.
“Given that the crisis does not have an economic background — it’s a pandemic that influenced the economy — we don’t want to have our companies bought by someone else, just because of this situation,” said Piotr Arak, head of the Polish Economic Institute, a government-backed think-tank.
More than half of inward investment comes from inside the EU and would therefore not be affected. But business leaders are still justifiably uneasy about the messages being sent to foreign investors. One concern is the fact that, according to the draft of the new rules, Poland would not just be able to block takeovers, but also any stake purchase of more than 10 per cent. This seems a low threshold if the aim is to prevent companies from coming under foreign control.
Maciej Witucki, head of Lewiatan, the Polish employers’ confederation, said another problem was that the provisions on which Polish companies would be covered by the new rules were so vague that they could be open to abuse. “We may be able to understand the philosophy of such a law. But the list [of companies covered] has to be extremely precise and short.”
Add to this the fact that investors who fail to notify the Polish authorities of their purchases could face fines of up to 100m zloty, and even jail terms of up to five years, and it is not surprising that Polish business leaders fear the measures could unsettle foreign investors and risk depriving Polish businesses of crucial sources of capital.
Proponents of the plan argue that such fears are overblown, and that it is similar to measures being taken by Germany to protect its companies from foreign takeovers. But Mr Witucki said this overlooked the huge difference between the capital markets in the two countries. “This kind of law introduced in Germany doesn’t cut German companies off from equity, from capital, because the local capital is extremely strong,” he said. “Poland is much more dependent on foreign investment.”
The pandemic has delivered such a shock to the global economy that extraordinary temporary measures may be needed to fight it. But they need to be designed in such a way that they do not damage investor confidence. Otherwise the solution risks making the problem worse.
