It is no news if a company plans takeover of a large business in another country in these days of buy-outs and global business networks. Nothing prevents a multi-billion dollar firm from gobbling up another.
But, the post 9/11 misgivings among many in the government of the United States of America about potential dangers of relying too much on a foreign firm, especially when it is from an Arab country, are only understandable.
This apprehension has almost jeopardised the attempt of the Dubai Aerospace Enterprises to acquire a part of the Landmark Aviation and Standard Aero in the US, which provide engine repair and overhaul aviation services.
The DAE is aiming to create a US$ 15bn aerospace and aviation services company through the acquisition. Dubai’s ruling family plans to bye a series of defence and aerospace businesses across the US. This is set to test the USA’s readiness to consider Arab owners of infrastructure assets in a potential deal which could be valued at more than US$ 1.5bn.
A similar bid for the takeover of operations of five port terminals in the US in the recent past by Dubai Ports Limited was almost scuttled by the Congress which expressed concerns about national security. The Bush administration, which had originally approved the sale valued at around US $700 million, was attacked by US politicians who said the sale threatened national security.
DAE and the private equity firm Carlyle are expected to request a 90-days review by the committee on foreign investment, or CFIUS. CFIUS examines foreign deals on national security grounds and is controlled by the Bush administration.
Both parties to the deal are expected to make clear to the government their willingness to agree to tough conditions to win the approval. One of the conditions may be the so-called ‘evergreen’ clause which would allow the government to undo the transaction at any time in future, if the companies failed to comply with an agreed security arrangement.
