UK government has issued a surprise public interest intervention notice against the proposed takeover of Welsh advanced materials specialist Perpetuus Group, claiming it represents a potential threat to national security.
Founded in 2013, the Perpetuus Group's main subsidiary is Perpetuus Advanced Materials - a company which recently boasted of a breakthrough in the production of plasma-processed P-doped graphene and the creation of a "drop reactor" prototype which could produce surface modified graphene in one-thirtieth the time of its previous approach.
Despite having just 14 employees and expenses that dramatically overshadow its turnover, the group has attracted acquisition interest - which, in turn, has attracted interest of another kind from Kwasi Kwarteng, Secretary of State for Business, Energy and Industrial Strategy (BEIS), whose department has put a temporary halt on any potential purchase by startup Taurus International over national security terms.
In its notice [PDF], signed by Jacqui Ward as the director for National Security & International at BEIS, the government outlines its concerns that "at least one-quarter of all graphene plasma goods and/or services which are supplied in the United Kingdom are supplied by Perpetuus Group" and that the proposed acquisition would cause "two or more enterprises [to] cease to be distinct."
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The government's notice has called on the Competition and Markets Authority (CMA) to investigate any planned acquisition "by the company TAURUS INTERNATIONAL LTD ('the company'), Dr ZHONGFU ZHOU or any enterprise associated with him or the company, or any subsidiary or any affiliates of either" - on the one hand a UK company which incorporated in October last year and has as its registered address a private domicile, and on the other a Chinese national who seemingly has no direct link to said company but who does work for Perpetuus.
Should the acquisition be forbidden permanently, it's not certain whether Perpetuus Group could survive. In its filings for the financial year ended March 2020 [PDF], Perpetuus Advanced Materials warned that the group's parent company had made a loss after tax of £4,445,648, heavily down from an already-paltry £1,216 profit the year before.
"The Group and the Parent Company's going concern status is reliant on the Group raising further funds, through both equity investment and finalisation of a licence agreement," the company's filing admitted. "These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Group and the Parent Company's ability to continue as a going concern."
The group's subsidiaries tell a tale of financial troubles, too:
During the year [ended March 2020], the company impaired its investments in subsidiary companies of £800,250 and the Group impaired intercompany debt owing to it from subsidiary companies of £4,228,928 due to the high probability that they may not be recovered.
The unnamed licensee
Perpetuus Group claims its fortunes are reversing, which may explain the interest in its acquisition. In February 2020 Perpetuus Advanced Materials announced it had granted an unnamed licensee "an exclusive right to execute a full fixed term licence for the manufacture and distribution of Perpetuus patent graphene," with production to begin in 2021.
"Subject to the execution of this agreement," it claimed, "the Group will see significant revenues during 2020 and ongoing royalty income commence in 2021."
It has not, however, yet filed its March 2021 return.
While Perpetuus may be struggling financially, Taurus Group appears to be largely non-existent. The company was incorporated in October last year [PDF] with Dr Victor Gembala listed as its sole shareholder, a name listed as the current or former director of 38 other companies - primarily, though not exclusively, operating in the field of real estate rather than advanced materials technologies.
It's also unclear exactly what Dr Zhongfu Zhou's relationship with the two companies is. While employed as a research professor and principal investigator at the Department of Physics of Aberystwyth University, Zhou is also listed as the "chief nanotechnology scientist" at Perpetuus Advanced Materials - yet the intervention notice issued by the government states that it covers any planned acquisition "by the company Taurus International Ltd, Dr Zhongfu Zhou, or any enterprise associated with him or the company" - suggesting a link between Zhou and Taurus not readily apparent from the outside.
For now, these questions will remain unanswered: neither Perpetuus, Taurus, nor Zhou responded to requests for comment in time for publication.
The intervention notice, meanwhile, calls for an investigation by the Competition and Markets Authority ahead of a report to be issued by February 7 2022. "To assist with this assessment," the CMA's notice explained, "the CMA invites comments on the impact of the transaction from any interested party with responses due by 4 October 2021."
Interested parties are able to submit comment on the CMA website. ®