Italy investigating sale of military drones group to Chinese investors - source

The Italian government of Mario Draghi has opened an inquiry into the sale of a company making high-tech drones for the armed forces to Chinese state-owned investors three years ago, a source close to the matter said.

The Italian government of Mario Draghi has opened an inquiry into the sale of a company making high-tech drones for the armed forces to Chinese state-owned investors three years ago, a source close to the matter said. Rome wants to verify whether the sale of a 75% holding in Alpi Aviation, based in northern Italy, had to be notified to the government under the so-called golden power regulation, the source said on Friday, asking not to be named.

Lawyers for Alpi Aviation said the company had complied with all rules in the sale. Rome has special vetting powers to block unwanted bids from non-EU suitors in industries deemed of strategic importance like defence, energy and telecoms.

This latest development shows how easy it is for changes in corporate ownership to go under the radar at a time when pressure is rising in the United States and Europe to monitor potential risks to national security from Chinese investors. The government may impose penalties or in the most serious case invalidate the sale, the source said.

On Thursday the Italian finance police said six people were under investigation in a case for allegedly breaching rules on the sale of military material as well as golden powers. The police, which did not name the company involved, said a 75% stake had been bought through an offshore company by "two important Chinese state-owned companies."

The acquisition of the stake, bought at a significantly inflated price, was carried out "exclusively to acquire technological and manufacturing know-how" that would be transferred to China with a reshoring of the business in the high-tech hub of Wuxi near Shanghai, the police said. "This was clearly just a predatory investment in technology... and this type of investment in this sector is forbidden," local tax police head Stefano Commentucci said.

A second source close to the matter, who confirmed the company was Alpi Aviation, said the two Chinese companies involved were China Corporate United Investment Holding and CRRC Capital Holding. These companies are in turn controlled by the Management Committee of Wuxi Liyuan Economic Development Zone and SASAC, the source said.

Calls made to these entities went unanswered outside of business hours. Lawyers for Alpi Aviation said the sale of the stake had been transparent and was in line with the real value of the company.

"Alpi Aviation, which firmly denies the company breached 'Golden Power' rules and laws on the transfer of strategic or technological information out of the country, reserves the right to safeguard its reputation," said lawyers Bruno and Antonio Malattia.

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