French nuclear firm

American takeover of French nuclear firm raises concerns in Paris

French government looks to prevent France-based Segault from falling under US ownership via a takeover deal.

BY GIORGIO LEALI

France's feisty Economy Minister Bruno Le Maire has another opportunity to pick a fight with Washington as a sensitive investment screening case is about to land on his desk.

The French government wants to prevent nuclear-submarine parts supplier Segault from falling into American hands just as France and the U.S. are experiencing new tensions over the Inflation Reduction Act, a $369 billion package of green subsidies and tax breaks that Paris and Brussels slammed as a protectionist move in breach of global trade rules.

The two countries have seen an ebb and flow in tensions in recent years that reached worrying levels back in 2021, when the U.S. infuriated France by snatching away a multibillion-euro submarine contract Paris had signed with Canberra. 

Now, the American takeover of the small France-based company with less than 100 employees, which was virtually unknown to most French people until a few weeks ago, is turning into a test of France's industrial sovereignty ambitions.

Segault's current owner, Canada’s industrial valves group Velan, is being bought by American industrial machinery giant Flowserve in a takeover deal announced earlier this year. Segault supplies components for nuclear-propelled submarines built by state-owned shipbuilder Naval Group and also makes industrial valves that are used on France’s flagship Charles de Gaulle aircraft carrier. If the deal goes through, Segault would become American-controlled, raising concerns in Paris' halls of power that Washington would then have access to strategic French technology. 

The deal has become a hot political issue in recent weeks, with right-wing MPs urging Le Maire to block the American buyer, and with a surprise left-wing candidate emerging as a bidder.

The government is currently “looking for a French buyer,” according to a spokesperson for France’s defense ministry, who declined to comment on offers received so far, noting that the French economy ministry has the final word on it.

Under French law, the economy ministry must be informed of the takeover of companies in strategic sectors in order to green-light or veto deals. The government confirmed that Segault's takeover falls within the scope of France’s investment screening powers and will be examined as soon as it is officially notified to French authorities.

Investment screening decisions are first assessed at the technical level within France’s powerful economy ministry, known as Bercy, but they also have a political dimension as they are ultimately taken by the economy minister himself via a decree. In the past, Le Maire has not hesitated to use his veto powers for politically sensitive cases, turning investment screening cases into political battles. In a bid to cast himself as a defender of French industrial jewels, Le Maire widened the scope of investment screening powers in 2019, during his first term.

As in many other EU countries, the scope of France's veto powers was further extended during the coronavirus pandemic, to prevent the risk that companies weakened by the crisis could be bought by foreign investors. Those new powers, which were meant to be temporary, have been repeatedly extended amid the economic crisis linked to Russia's full-scale invasion of Ukraine.

The Segault case is also seen as an opportunity for Paris to show its muscle.

For socialist Michel Sapin, who served several times as France’s finance and economy minister, the deal gives the government an opportunity to present itself as a defender of national gems by taking “a braggart position on re-industrialization and industrial sovereignty” that, according to him, has not been backed up by action so far. 

“We can’t deny that we have some irritants with Americans, especially the IRA in this phase,” said Macron’s ally Marie-Pierre Vedrenne, vice chair of the European Parliament’s trade committee, while noting that France’s investment screening won’t discriminate against U.S. buyers. 

But Macron's allies were also quick to insist that Paris’ efforts to take Segault away from its American buyer was not a protectionist attempt to block a U.S. investment.

“The criteria won’t be friendship or mistrust toward Washington,” said a French minister, who was not authorized to speak publicly on the matter, adding that “the context” should not prevent Paris from “controlling some sovereignty aspects” of the deal.  

For Vedrenne, Macron's ally in the European Parliament, "the Americans are first of all in a mindset of prior defense of their interests and we see it with this case … sovereignty is at stake so we have to be vigilant whatever the nationality [of the buyer] is, even if it is an ally, because the defense of the French interests must be examined above all.”

Despite some displays of friendship, tensions between Paris and Washington have risen at a steady pace over recent months and increased after French President Emmanuel Macron told POLITICO that Europe should not be “America’s followers” when it comes to China policy. 

Le Maire has also been particularly harsh with the U.S., accusing Washington of using Russia’s war in Ukraine to establish “economic domination” and of breaching WTO rules with its massive subsidy package, the Inflation Reduction Act. Earlier this month, he said that Europe should, much like the the U.S. and China, put first its own industrial interests and stop obeying the free-trade dogma. 

Earlier in the month, as he visited Washington, he accused "some" in the U.S. of applying double standards when it comes to trade with China. "I see that the volume of trade between China and the United States has never been so high ... we are asking Europe to give up trade that has increased between the United States and China. We don't want to be the village idiots, who get screwed and let other powers trade with China while we would no longer have the right to do so," the minister said.

Should France decide to veto the deal, Segault could be carved out from Flowserve's acquisition of Velan. However it is unclear whether the American buyer would still be interested in buying Velan without Segault.

Le Maire's quest for a French buyer might be a tough mission to accomplish.

Another former economy minister and “Made in France” champion, socialist Arnaud Montebourg urged Le Maire to block the deal earlier this month and offered to buy Segault together with the help of Pierre-Edouard Stérin, a businessman who in the past has been close to far-right former presidential candidate Eric Zemmour.

A person with direct knowledge of the file but who was not authorized to speak publicly said that it is unlikely Le Maire would back Montebourg's offer.