15 Excursion: Sovereign Wealth Funds Table of Contents IX
15.1 General Remarks
Sovereign wealth funds, foreign state-owned monopolies, and the national cham-
pions of other countries have emerged as an important group of buyers in the
takeover market. This has increased regulatory concerns in the targets’ home
countries and made governments more cautious than before.
There are many examples of this phenomenom. Sovereign wealth funds originating from
China and the Persian Gulf have invested in various industries worldwide in order to place
their huge currency reserves. Russian monopolies have been used as a foreign policy tool,
particularly in Europe. In 2006, France blocked the attempt of Enel, the largest power com-
pany in Italy, to take over Suez, the French energy champion, and Spain blocked the bid of
E.ON, a very large Germany energy company, for Endesa, the leading utility in the Spanish
system.
Should sovereign wealth funds, foreign state-owned monopolies, and national
champions be allowed to invest freely? According to one opinion, the market
should decide, because investors are a good thing and sovereign wealth funds
should be allowed to invest as freely as any other investors.
According the view represented in section 17.4 and Volume I, some investors
can be bad for the firm. The firm relies on its shareholders as important agents. It
is possible that a certain shareholder tries to maximise its own private benefits re-
gardless of the harm caused to the firm. The existence of such shareholders is bad
for the firm and bad for the company’s other shareholders.
Furthermore, some investors neither share the core values of market partici-
pants nor want to play by the market’s rules. For example, a foreign country may
try to take over a company for the purpose of furthering its own policy interests
regardless of the interests of the firm or its other shareholders.
Such policy interests can be contrary to the public policy interests of the host
country (the target company’s home country). For example, Russia might prefer to
buy control over the European gas distribution network in order to further its own
long-term foreign policy interests. In such a situation, it would be normal for a
Member State of the EU to protect its own legitimate public policy interests.
To sum up: Many sovereign wealth funds and national champions act like
“normal” institutional or trade investors. Many of them are good long-term inves-
tors whose interests are aligned with those of the firm and other long-term share-
P. Mäntysaari, The Law of Corporate Finance: General Principles and EU Law,
DOI 10.1007/ 978-3-642-03058-1_15, © Springer-Verlag Berlin Heidelberg 2010