The Acquisition of Stjernberg Automation
As part of our ongoing research into Chinese acquisitions in Europe, Datenna decided to highlight and research remarkable cases. This case considers the acquisition of the Swedish Stjernberg AB.
Short read
- Stjernberg Automation AB, was a highly specialized Swedish laser equipment manufacturer and digital manufacturing provider established in 2008.
- In 2017, 66.6% of the company equity was acquired by the Chinese Tus Holding. Since then, the Swedish firm had been establishing different entities through China, both wholly owned and joint ventures. Through intricate ownership structures, these entities are linked with the central government.
- Shortly thereafter, Stjernberg Automation AB has filed for bankruptcy making us perceive that, after the acquisition of majority shares by Tus holding, the company’s economic performance didn’t benefit form the takeover. This could suggests the existence of technology absorption motives behind the acquisition or simply a worse management of the European operations after the takeover.
Stjernberg's activities fell into the “High technology manufacturing” category, an important area in China's strategic development plans and industrial policies.
Stjernberg Automation AB
Stjernberg Automation AB was established in Sweden in 2008, and was a highly specialized laser equipment manufacturer and a digital manufacturing provider. Due to its pioneering role in laser technologies, the company could boast of clients like Volvo, 3M, Tetra Pak, and Saab and was considered to be a technological leader in the European market. Far from merely focusing on laser technology, the firm also provided its customers with services aimed at digitalizing manufacturing processes. Through its management of cutting-edge technology, the firm’s activities fell into the “High technology manufacturing” category, an important area of development both in the “Industry 4.0” and “Made in China 2025” programs. These two are the main landmarks in China’s long term policy strategies which seek to bring about the so-called “4th industrialization” through the digitalization of manufacturing processes, and the enhancement of high-quality production.
Acquisition by Chinese State-Backed Tus Holdings
Probably mainly due to the appeal of the company’s scope of business, Stjernberg Automation AB has been targeted by Chinese investors in 2017, when 66.6% of the company’s stakes have been acquired by Tus-Holdings Co., Ltd. This acquisition resulted in the transfer of the company’s majority share to the Chinese investor. However, at the time, the company’s management remained unchanged. Important to note, the Chinese partner is a relevant investment holdings group linked to the Chinese Tsinghua University and focusing on Science and Technology services. In the company description it can be seen that it “takes full responsibility for developing, constructing, operating and managing Tsinghua University Science Park”, a relevant innovation and technology hub in China.
As can be derived from the company platform, the acquirer’s main shareholder is Tsinghua University, which is one major public research university in China. Due to its relevance, the academic institution is strongly tied to the state, which provides funds and development outlooks. The acquiring company has high Chinese state influence with being Tsinghua University the main stakeholder of the holding. Tsinghua University is one of the major public research universities in China and one of the most renowned universities in the country, ranking as the 1st Asian university. Due to its relevance, the academic institution is strongly tied to the state which provides academic research funds.
Ownership tree Stjernberg Automation AB
Exploring the Chinese Market
The acquisition from Tus Holding seems to have been the trigger for the Swedish company explorative journey into the Chinese market. We first note that Stjernberg Automation AB established a Wholly Foreign Owned Enterprise named Shanghai Rui Huan Technology Co. Ltd, fully invested by Stjernberg AB which detains 100% shares. After the settlement of this entity, another company was established, namely Ningbo Huanbei Automation Co., Ltd. which is also fully controlled by Stjernberg through another of their companies, this time based in Hong Kong and called Stjernberg Group Limited. We notice that the Swedish company was also involved in a joint venture with two local entities, both operating in the field of smart manufacturing.
Changes in the Board and Bankruptcy
The main investment to strike our eye is the one made into the company Zhejiang Huanbei Laser Technology Co., Ltd. which is engaged in laser technology, robotics, technology development with a registered capital of 6.5 M euro. Originally, the firm was settled as a Sino-foreign co-owned limited liability company owned both by Stjernberg and a local partner. From 2019 it became a Limited liability company only funded by a Chinese actor. Digging into the management structure of the company, we see that at the origins, the General and Vice manager of was Jan Magnus Stjenberg, also director of the Swedish company at issue. In 2021 the whole management has been replaced with local, thus Chinese, staff. This meaning that the Swedish influence within the board of directors was completely erased. At the same date there has also been a change in the scope of business: from “Engineering and technical research and experimental development” to “other technical promotion services.”
The removal of the Swedish directors does not necessarily mean that the technology entailed in the joint venture hasn’t been absorbed. The changes in the management and business scope are aligned with Stjernberg Automation bankruptcy in 2019. Apparently, the Chinese acquisition back in 2017 constitutes the starting point of the jeopardisation of the company’s activities. In fact, since 2017, the firm financial performance started shrinking with a decrease in production value by 8% and a negative EBIT value of almost 1 million euro in 2019, year in which the company went bankrupt.
The Risk of Unwanted Tech-Transfer
The acquisition of the Swedish company in 2017 affected the parent company operations while marked the start of the company’s exploration of the Chinese market with the settlement of the discussed joint ventures. The release of a new framework for investment screening at the EU-level might enhance and better coordinate FDI screening practices at the country level. Nevertheless, the responsibility of settling thorough screening procedures preventing relevant technology flee from EU still lays in the hands of national FDI screening units. We hope that episodes such as the one of Stjernberg company trigger considerations and discussion on the topic of unnoticed technology transfer to China.
