You're reading: Chinese acquisition of Motor Sich still ‘under review’ until February

A takeover attempt at the Ukrainian aerospace firm Motor Sich by a state-owned Chinese company is “still under review” until February, officials told the Kyiv Post on Dec. 16.

In the past week, multiple Ukrainian media outlets reported that a deal was completed and the controversial share sale to least one Chinese company was finalized.

But competition regulators in Ukraine still have the final say and they are taking their time over the deal.

“It is still under review,” Yuriy Terentyev, chairman of the Antimonopoly Committee of Ukraine, told the Kyiv Post. “The case is still open at least until the end of January,” he said, adding that the ACMU was waiting for UkrOboronProm to provide information on the proposed investment.

“We are still awaiting a decision from the Antimonopoly Committee of Ukraine,” said Mustafa Nayyem, a former Ukrainian lawmaker, now Deputy Head of Government Relations at UkrOboronProm, the Ukrainian state-run defense production giant.

On June 7, the government proposed that Ukroboronprom and the state-owned Chinese companies Beijing Skyrizon Aviation and their junior partner Xinwei could jointly manage between 25% and 50% of Motor Sich shares in a joint management and control arrangement of the enterprise.

On June 19, the main package of agreements was signed, but it still requires the approval of the AMCU. On Dec. 13, the president and majority owner of Motor Sich Vyacheslav Boguslaev, a former pro-Russian lawmaker, confirmed the sale of his shares to Chinese companies during a media trip to his factory in southeastern Ukraine.

“I could close the plant, I could reduce the number of employees. Such a problem faced me. We decided to find an investor. We were told who the investor was, we went and talked with China. The owners of the shares sold them through our exchange. And I sold my shares,” he told journalists.

According to Boguslayev, along with the purchase of shares, the Chinese have pledged to invest a further $150 million into production over two years. Earlier reports from 2018 had suggested that at least some of Motor Sich production, research and development may be outsourced to China.

Records show that Skyrizon tried to acquire the controlling stake by buying $100 million worth of shares. Skyrizon initially said it planned to invest more in Ukrainian factories but move some of the manufacturing to China. Court documents show Skyrizon used a subsidiary company in the British Virgin Islands to acquire the 56% stake in Motor Sich.

But in September 2017, the authorities in Ukraine launched an investigation into the Zaporizhia-based aerospace company. Ukraine’s State Security Service, or SBU, launched a criminal investigation and made allegations of an “enemy plot” and “preparations for sabotage” before asking the courts to freeze that initial $100 million transfer.

The SBU and courts backed off. Since then, the deal has been in the hands of the AMCU.

Ukrainian authorities and its NATO partners have concerns about state-owned Skyrizon’s multi million dollar move on Motor Sich. The firm is considered strategically vital to Ukraine and is one of the world’s largest manufacturers of turbine engines and engine parts for civilian and military aircraft.

Pentagon and NATO officials, as well as G7 diplomats have all warned against the Skyrizon interest in Motor Sich and said that Chinese investment in Ukraine may be a double-edged sword with a potentially bad impact on Ukraine and its allies.

A high-ranking Ukrainian source close to ongoing negotiations who cannot be named for security reasons told the Kyiv Post on Dec. 16 that “there are forces trying to bend the situation in the direction” of preventing the Chinese takeover.

Terentyev, chairman of the ACMU, said: “We are impartial and are waiting for the full information to evaluate the transaction.”