China took control of an Italian military drone maker without authorities knowing it, report says

Dronegun Tactical. Photo: ASEAN Military Review. Sketched by the Pan Pacific Agency.

BEIJING, Nov 16, 2021, CNBC. Two Chinese state firms took control of an Italian military drone maker more than three years ago via an offshore company — without the knowledge of authorities in Italy and Europe, the Wall Street Journal reported Monday, according to the CNBC.

The offshore company, Mars (HK) Information Technology, started the process of transferring Alpi’s technical and intellectual property to a new production site in China, the report said.

Mars had in July 2018 bought a 75% stake in Italian drone maker Alpi Aviation for 4 million euros, or $4.6 million, the Journal reported. Mars also invested another 1.5 million euros in Alpi — an amount Italian police said was a significant overpayment, according to the report.

Italian authorities are investigating the 2018 deal, including whether Alpi should have notified the Italian government of the stake sale, as well as whether Alpi had transferred technology and started production in China, according to the report.

Police concluded that Mars was a shell company linked to two Chinese state-controlled firms, the Journal said.

Mars was registered in Hong Kong just two months before the Alpi deal, according to the report. It added that police traced Mars’ ownership of Alpi to China Railway Rolling Stock Corp or CRRC — a large Chinese state-owned rail company — and an investment group controlled by the Wuxi municipal government.

Wuxi is a city near Shanghai. A Reuters report in September identified the investment group as China Corporate United Investment Holding.

Alpi had supplied drones used by the Italian Air Force in Afghanistan, the report said.

As of publication, Alpi and CRRC did not respond to CNBC’s request for comment on the report. Mars and the Wuxi investment group could not be reached for comment.

The Journal, quoting a statement from Alpi, said the Italian drone maker denied it had broken laws on transferring strategic information and technology out of Italy. The company also said its stake sale was transparent and made at real value.

European companies are generally required to report relevant foreign takeovers to authorities, such as when the deals involve security, according to the Journal’s report.

The Italian government has the right to veto takeovers by non-EU buyers in industries deemed strategic such as defense and communications, the report said.

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