Taurus/Perpetuus transaction becomes subject to national security scrutiny

Taurus/Perpetuus transaction becomes subject to national security scrutiny

National Security and Investment Act 2021

On 5 September 2021, the Department for Business, Energy and Industrial Strategy (BEIS) published a Public Interest Intervention Notice (PIIN) to intervene in the proposed acquisition of the Perpetuus Group by Taurus International Ltd and Dr Zhongfu Zhou on national security grounds.

PIINs on national security grounds have been rare to date. Nevertheless, BEIS has clearly chosen in this case to issue the PIIN under the current framework provided by the Enterprise Act 2002, rather than awaiting stronger call-in powers under the incoming National Security & Investment Act 2021 (NSI Act), which will come into force on 4 January 2022.


In the UK, the Competition and Markets Authority (CMA) investigates the competition law aspects of transactions. Under the Enterprise Act, the Secretary of State for the BEIS is also able to intervene in transactions though a PIIN on the basis of one or more public interest grounds, including national security. This power of intervention generally only applies to relevant merger situations that fall within the scope of the Enterprise Act for merger control purposes.

The Secretary of State believes the Zhou/Taurus/Perpetuus transaction is a relevant merger situation under the Enterprise Act; and, although Perpetuus is a small company (its turnover appearing to be less than £500,000), at least one-quarter of all graphene plasma goods and/or services supplied in the UK are supplied by the Perpetuus Group, which is the relevant national security concern. Graphene is a single layer of carbon and, at one atom thick, the lightest, strongest and thinnest compound, which is many times stronger than steel. It has defence, electronics and energy industry applications and is listed within scope of Advanced Materials under the NSI Act; and, whilst little detail has been shared on the concerns, BEIS might be concerned that key IP in an emerging graphene industry moves abroad, in particular to China.

As regards the acquirer, Dr Zhou is already listed on the Perpetuus website as an “associate” of the company and a “Chief Nanotechnology Scientist”. Whilst Dr Zhou has held a number of positions in the UK, including at Aberystwyth University, he has also been active in China, including as a Director of Inner Mongolia Industrial Research Institute for Composite Materials. The other acquirer entity, Taurus International Ltd, is a relatively newly formed company with only one director and a registered office address at what appears to be a residential house in South London.

The new NSI regime

When the NSI Act comes into force, it will replace the national security aspects of the government’s current intervention powers under the Enterprise Act. The NSI Act is being adopted in response to the view that the current regime cannot adequately address the long-term shifts in the balance of global economic and military power, increasing competition between states, and the emergence of powerful non-state actors.

A detailed breakdown of the NSI Act’s key features can be found here. In summary, the NSI Act strengthens the government’s powers to scrutinise transactions on the grounds of national security, specifically through allowing the Secretary of State to call-in any transaction which falls within the scope of the regime to assess its risk to national security.

The government has the right to apply the provisions of the NSI Act retrospectively to transactions completing between 12 November 2020 and 3 January 2022, with the aim of deterring parties from rushing transactions through with the intention of avoiding scrutiny. This retroactive power will likely be used cautiously and only in relation to a minority of transactions raising more serious national security concerns; and the fact the Secretary of State decided to intervene in the Perpetuus Group acquisition through the current Enterprise Act framework is perhaps a reflection of this. However, the extent to which BEIS will use its new NSI Act powers (as of 4 January 2022) to intervene retroactively in transactions completed since 12 November 2020 remains to be seen.

The next steps

Following publication of the PIIN into the Zhou/Taurus/Perpetuus transaction, the CMA is now required to investigate and report on jurisdiction and competition issues with respect to the acquisition by 7 February 2022.  This will include a summary of any representations it receives on potential national security issues and the CMA has invited comments on the impact of the transaction by 4 October 2021.

Alongside the CMA’s process, the Secretary of State will examine whether the Zhou/Taurus/Perpetuus transaction may operate against the national security public interest and whether to refer the merger for a Phase 2 investigation.

The PIIN serves as a reminder that the BEIS continues to closely monitor transactions in the lead up to the NSI Act coming into force in January 2022. Businesses and investors should continue to seek legal advice to ensure their compliance with the law, as the old regime makes way for the new.

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