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Clifford Chance

Clifford Chance

Antitrust/FDI Insights

Secretary of State intervenes in the acquisition of UK graphene firm on national security grounds

The acquisition by Taurus of Welsh advanced materials firm Perpetuus is the latest in a flurry of on-going formal and informal national security reviews in the UK.

On 5 September 2021, the Secretary of State for Business, Energy & Industrial Strategy issued a public interest intervention notice (PIIN) on the ground of national security in relation to the acquisition of the Perpetuus Group by Taurus International Ltd and Dr Zhongfu Zhou. 

Dr Zhou is listed as Perpetuus' chief nanotechnology specialist, while little information is available about Taurus.

Perpetuus develops and supplies surface modified, functionalised graphene stacks and carbon nanotubes for commercial uses. Graphene has been described as a disruptive technology, with a wide range of potential applications including transport, medicine, electronics, energy, and defence, due to its unique features. Indeed, graphene is said to be many times stronger than steel, yet incredibly lightweight, flexible and thin.

The potential significance of this material may explain the UK government's interest in a target company which has achieved less than £115k revenues in the UK in FY2020 (based on its audited accounts).

Given the low revenues, the Secretary of State called in the transaction for scrutiny on the basis that the target supplies at least one quarter of all graphene plasma goods and/or service in the UK. As the target's products fall within one of the categories of advanced technologies to which lower review thresholds apply, the transaction is reviewable by the Competition and Markets Authority (CMA) even though the acquirer apparently has no UK activities in this area. This is the first time that the Secretary of State has relied on this modified share of supply test to issue a PIIN.

The CMA is tasked with collecting representations on the national security aspects of the transaction, in parallel with its competition review, and has until 7 February 2022 to report to the Secretary of State. 

This is the Secretary of State's third national security public interest intervention this year, following the on-going reviews of the acquisition of UK chip designer Arm by US firm Nvidia and the takeover of UK defence group Ultra Electronics by Cobham, which is owned by the US private equity group Advent International. By comparison, there were no formal national security reviews initiated in 2020, and four in 2019. It is notable that, despite the National Security & Investment Act 2021 coming into force fully in less than 4 months on 4 January 2022 (which will give the Secretary of State increased powers to scrutinise transactions, including the power to call in transactions retrospectively), the UK government continues to issue PIINs under the current, more cumbersome regime. 

In addition, the UK government is also reported to be monitoring the takeovers of UK aerospace and defence company Meggitt by US company Parker Hannifin and of semiconductor manufacturer Newport Wafer Fab by Dutch company Nexperia for their impact on the UK's national security.