On 9 October 2019 the Secretary of State for Digital, Culture, Media and Sport (SoS) announced that she is intending to accept undertakings offered by the parties to the proposed acquisition of British satellite operator Inmarsat plc by Connect BidCo (a private-equity led Consortium including equity funds based in Canada). This deal has been closely watched by companies and their advisors seeking insights into how the UK Government’s approach to foreign investment in sensitive sectors is developing, ahead of the proposed implementation of a new standalone FDI regime.
Assuming the draft undertakings are ultimately confirmed following a short consultation period (which seems likely), the outcome in this case will be in line with the trend to date of avoiding an in-depth Phase 2 investigation in defence mergers on national security grounds through the use of “undertakings in lieu of reference”. However, it is notable that the undertakings which the SoS is proposing to accept are far more onerous and detailed than the voluntary undertakings first offered by the parties (and accepted by the UK Government) shortly after notification of the proposed transaction to the Competition and Markets Authority (CMA). Moreover, the decision of the SoS to formally intervene in this deal on public interest grounds using her powers under the Enterprise Act 2002, in circumstances where voluntary undertakings had already been accepted by the Government, is in marked contrast to the approach adopted in the earlier Melrose/GKN deal.
Whilst it seems likely that this particular transaction will now be permitted to proceed, companies considering acquisitions in potentially sensitive sectors should remain alert to the risk of intervention on public interest grounds, against a backdrop of increased scrutiny of foreign investment ahead of the implementation of further legislative reforms in this area.
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