Pentagon insists it is open to foreign investment in the U.S.

WASHINGTON Sat Aug 31, 2013 1:20am EDT

An aerial view of the Pentagon building in Washington, June 15, 2005.

An aerial view of the Pentagon building in Washington, June 15, 2005.

WASHINGTON (Reuters) - The Pentagon is taking a harder look at proposed foreign acquisitions of U.S. companies given the increasing financial complexity of such deals, but continues to encourage foreign investment, a top U.S. defense official said this week.

"If you have a deal that is in the interest of the U.S. economy and does not impinge on national security, we will approve it," said Brett Lambert, the Pentagon's representative on an interagency committee that reviews foreign takeovers.

Lambert, who retires Saturday after four years as the deputy assistant secretary of defense for manufacturing and industrial policy, bristled at the suggestion that the Committee on Foreign Investment in the United States (CFIUS) was making it difficult for foreign investors to acquire U.S. companies.

"It's completely the opposite," Lambert told Reuters in an interview on Tuesday.

He said foreign interest in U.S. companies remained high, given the continued importance of the U.S. defense market despite recent budget cuts, and said he expected the number of foreign transactions reviewed by CFIUS to double in coming years from more than 100 last year.

"You have foreign capital that wants to come in, which we want, which we encourage. The question is how do we allow that foreign capital to come in while protecting national security," Lambert said.

He acknowledged that the Defense Department and other agencies involved in the CFIUS review process were often taking longer to review transactions but said that was largely because of the increasing complexity of the transactions.

Lambert said high-profile cases that were rejected tended to generate headlines but the majority of cases were approved, including some with conditions.

He declined to discuss specific CFIUS cases under review, including a $4.7 billion bid by a Chinese company to take over Virginia-based pork producer Smithfield Foods Inc.

The most recent CFIUS report to Congress showed that the committee reviewed 111 transactions in 2011, of which 40 were investigated under a longer 45-day review. Six of the notices were withdrawn. Data for 2012 has not been released.

U.S. lawmakers have raised concerns about various takeover bids by Chinese firms in recent years, but CFIUS approved plans by China's largest auto parts maker in January to buy car battery maker A123 Systems Inc.

In February, CFIUS approved the $15.1 billion purchase of Canadian oil firm Nexen Inc by China's state-owned CNOOC Ltd., although it imposed conditions limiting its operation of wells in the Gulf of Mexico.

CFIUS rejected a bid by another Chinese-owned company, Ralls Corp, to build wind farms near a U.S. military site in Oregon, but the company has challenged that decision in court.

Lambert said the Nexen case showed U.S. authorities were willing to work with companies seeking to invest in the United States as long as they showed a willingness to compromise. "We can come to accommodations. We will work with the companies but they have to respect our national security concerns."

Lambert said foreign companies seeking to invest in the United States should hire lawyers who had already shepherded other deals through the process.

He said government officials also welcomed contact with companies involved in mergers or acquisitions, noting that senior officials in the proposed merger of Europe's EADS, the parent of Airbus, and Britain's BAE Systems had been forthcoming about their plans.

Lambert said meeting those officials helped him keep Pentagon leaders informed about the merger, which ultimately collapsed.

Lambert co-founded a national security consultancy, DFI International, in 1989 and then sold it in 2007 to Detica, a London-based firm that was subsequently taken over by BAE Systems. He said he reviewed the CFIUS files on the DFI sale after coming to the Pentagon to understand the process better from the government's point of view.

(Editing by Paul Tait)

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Comments (2)
CountryPride wrote:
Why does America need to justify extra scrutiny and concern when it comes to Chinese investment. Anyone with an ounce of common sense knows that money coming from China entering the US market has either been criminally smuggled out by corrupt businessmen and government officials and their families or by legal means for their State owned enterprises which are only out to bankrupt American companies and steal what they can. I wish the media would report the real news and show just how many Chinese nationals in recent years have been arrested and convicted of espionage against America. Just go to the site and type in Chinese in the search box and you will have page after page of cases of Chinese nationals who have been arrested for criminal theft or other crimes to attack our country and businesses. So in that case, we actually need to not be so open to foreign investment especially when we continue to get burned in the end!

Aug 31, 2013 8:25am EDT  --  Report as abuse
That’s all America needs – selling the country, when America most needs building up and more jobs for Americans.

Aug 31, 2013 10:37am EDT  --  Report as abuse
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