France Weighs Stakes in Nuclear Suppliers to Avert US Takeovers

Ania Nussbaum
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(Bloomberg) -- France is considering using a local investor to take a stake in nuclear suppliers Velan SAS and Segault as President Emmanuel Macron steps up efforts to secure strategic industries from foreign takeovers, including by the US.

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Paris is determined to maintain a measure of oversight on the two units as Texas-based Flowserve Corp. negotiates with the French government about their control, according to people familiar with the issue.

The two businesses are French units of Quebec-based Velan Inc., which Flowserve agreed to buy for C$329 million ($247 million) in February. They are both deemed critical to France’s civil and defense nuclear industries.

Options being considered include France pairing a local private investor with a state-backed fund it’s already lined up to obtain a stake in the businesses, said the people who asked not be named on confidential talks.

Another option is obtaining governance commitments such as having a government representative on the boards, oversight on exports and keeping French jobs, said the people. Paris could also take a so-called “golden share” in each of the units to give it veto rights.

A final decision has yet to be made on the options, the people said. The government is aware that some demands could prompt Flowserve to reconsider the acquisition, they added.

French President Emmanuel Macron hasn’t been shy about intervening in foreign acquisitions. His government derailed a merger between French and Italian automakers Renault SA and Fiat in 2019, and the takeover of French grocery chain Carrefour SA by Canada’s Alimentation Couche-Tard Inc. in 2021.

Still, the review of the takeover of Velan goes a step further, intervening in a deal between US and Canadian companies.

A fund backed by the French state and electricity utility Electricite de France SA was lined up to take a stake in the French businesses, Bloomberg reported in May.

A spokesman for the French Finance Ministry declined to comment. The defense ministry didn’t return a request for comment.

A spokesperson for Flowserve said the company has followed the traditional legal route for this type of investment. It is committed to implementing a solution that ensures strong protection of French strategic interests, the spokesperson added. Following talks with officials, the company said it’s confident it’s meeting their concerns.

Export Rules

US export rules such as the International Traffic in Arms Regulations, or ITAR, could pose a problem for France, according to the people. They said it was unclear whether ITAR would apply to Velan SAS and Segault’s technologies, and therefore give Washington the power to veto the export of French submarines.

French resistance to the transaction also comes amid a push by Macron for greater “strategic autonomy” for Europe and to increase investment in defense. The government demanded, and got, a golden share in aerospace supplier Exxelia International as part of its approval this year of a takeover by Hollywood, Florida-based Heico Corp. Three years ago, Macron blocked the purchase of night-vision technology company Photonis by the US’s Teledyne.

The decision on Velan now rests with the Finance Ministry, which can either allow the deal to proceed without conditions, require measures or reject it. Silence from the administration would amount to rejection.

State-Backed Fund

Earlier this month, Flowserve and Canada’s Velan extended the closing date for the takeover, saying they needed more time for regulatory approvals. The transaction was initially expected to close by June. The French government hasn’t communicated with Flowserve for about a month as it readies its demands, one of the people said.

Velan generates about 25% of its revenue in France. Segault SAS is a key supplier to French state-owned nuclear-propelled submarine maker Naval Group SA, and provided equipment for the Charles de Gaulle aircraft carrier.

Velan SAS’s civil technologies are key for the maintenance of Electricite de France’s equipment. Macron has decreed nuclear power a priority for France’s future and its ambitions to cut emissions.

Macron has been expanding the scope of industries that France deems strategic and lowered the threshold to trigger a government review in case of a foreign takeover, a system similar to the US’s Committee on Foreign Investments known as CFIUS. In France, those sectors include nuclear technology, semiconductors and food security.

--With assistance from Alan Katz.

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