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Government Mum On Blocking Foreign Buyer For MTU

Posted on December 5, 2005

The German government has declined to discuss whether it would let a foreign company buy DaimlerChrysler’s heavy diesel engine unit MTU Friedrichshafen, which Berlin regards as a strategic asset. A source familiar with the sales process has told Reuters that Swedish buyout firm EQT is on the verge of buying MTU, as the world's fifth-biggest carmaker disposes of non-core operations.

MTU makes engines for ships, locomotives, power plants, heavy vehicles and tanks. It had annual sales of €1.35 billion ($1.58 billion) in 2004.

"As long as there has been no decision by the company, the government will not comment," said Economy Ministry spokeswoman Sabine Maass. "When it's clear who the firm has been sold to then compatibility with export rules will be assessed." Previously, buyout group Kohlberg Kravis Roberts and partner Dubai International Capital had been seen as frontrunners to buy MTU for around €1.7 billion. German truckmaker MAN was also a finalist in the sales process and was said to be the favorite of MTU staff who feared a financial buyer would break up MTU.

Germany said in September it would extend controls on the sale to foreign investors of firms that make military equipment in a move that would let the government block the sale of MTU. The order was approved by the then center-left government before it was voted out of office and replaced by a coalition between conservatives and Social Democrats.

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