Netherlands sees no issues in Chinese bid for Draka

By Greg Roumeliotis and Victoria Bi

AMSTERDAM/SHANGHAI (BestGrowthStock) – The Dutch government said it saw no issues with Xinmao Group’s bid for cable maker Draka Holding NV (DRAK.AS: ) as the offer’s endorsement from the city of Tianjin hinted at possible wider Chinese state support.

“Foreign companies must, like Dutch companies, comply with Dutch law and regulations. We therefore do not foresee any concerns about the deal,” Ruud Stevens, government spokesman on foreign economic relations, told Reuters on Thursday.

The idea that foreign companies are good for a country’s economic dynamism and competitiveness is a guiding principle for the Netherlands, as foreign investments generate sales turnover, productivity, employment and innovation, Stevens said.

“The Dutch economy has key interests in ensuring the growth of foreign investments, especially from growing economies like China,” he added.

Equally Chinese officials are encouraging companies to use overseas acquisitions to gain technological expertise.

Earlier on Thursday an official at the northern Chinese city of Tianjin said it fully supported Xinmao’s bid for Draka, the first indication of possible Chinese government backing for the deal. The official did not specify whether the city would offer financial help.

Support for Xinmao from Tianjin does not guarantee backing from central government but will lend credence to its offer.

“The Tianjin city government wholeheartedly supports Xinmao’s bid for the Dutch company,” Chen Zongsheng, vice secretary general of the Tianjin municipal government, told Reuters on the sidelines of a Shanghai forum.

BIDDING WAR

Draka has become the darling of the cable making industry, with France’s Nexans (NEXS.PA: ), Italy’s Prysmian (PRY.MI: ) and Xinmao all making approaches as they chase a slice of the market for cables in everything from telecoms to cars.

A three-way bidding war for Draka remains a possibility even though Nexans said it would not now submit an earlier 15 euros per share offer.

Draka shares closed down 0.8 percent at 19.21 euros, well above the 16.86 euros value of the Prysmian offer price but short of the 20.5 euros value of Xinmao’s offer.

Xinmao had moved on Wednesday to dispel doubts over its unanticipated $1.3 billion offer for Draka, saying it had backing from a Chinese bank.

Draka, a leader in elevator cables, provided cables for the 58 lifts of the world’s tallest skyscraper, the 828 meter Burj Khalifa in Dubai. It is also China’s largest supplier of optical fiber and has offices in 31 countries, employing some 9,600 people.

While a successful takeover by Xinmao would aid China’s “Triple Play” plans to roll out broadband networks, European analysts have questioned the viability of its offer.

China accounted for 46 percent of global demand for fiber optic cable in 2009, though consumption from Chinese network operators dropped by 11 percent in the first nine months of 2010, according to market research firm CRU.

Xinmao, founded in 2000 by a former Chinese air force lieutenant, employs around 30,000 people.

(Additional reporting by Jason Subler; Editing by David Cowell and David Holmes)

($1=.7482 Euro)

Netherlands sees no issues in Chinese bid for Draka