Warburg Pincus criticises German review of PSI energy software deal

René Obermann, the former head of Deutsche Telekom who now chairs the US private equity firm Warburg Pincus, has criticised the way the German government screened his firm’s takeover of the Berlin software company PSI. According to Golem, he said some federal ministries raised “unfounded concerns” and even contacted PSI’s customers directly, while the deal itself was approved in October under conditions that have not been made public.

What happened

Golem reports that Obermann gave his views in an interview with the business newspaper Handelsblatt. He praised the Bundeswirtschaftsministerium (the Federal Ministry for Economic Affairs), saying it had worked “professionally, objectively and quickly”. He was much less positive about other parts of government. According to Obermann, other ministries raised “unfounded concerns”. He added: “Particularly remarkable: customers of the company concerned were apparently approached directly by ministries.” He said this caused unnecessary uncertainty.

Obermann did not reject investment screening outright. He said he would welcome an Investitionsprüfungsgesetz (an investment screening law), as long as it set clear criteria and a predictable timeframe. He also argued for more foreign capital in Germany and Europe. For that reason, he said, he welcomed the federal government’s plan to meet international investors at an investment summit on 20 October.

The deal had been controversial for some time. Golem reports that security policy specialists in the Bundestag (the German federal parliament) had already issued strong warnings about Warburg Pincus’s plan to take a majority stake in PSI. According to Golem, PSI is the European market leader in network control systems for electricity, gas, heating, oil and water, and also makes industrial software. Industry figures cited by Golem say that around 90 percent of all large and medium-sized electricity and gas network operators in Germany use PSI software.

Marc Henrichmann of the CDU, who chairs the parliamentary body that oversees Germany’s intelligence services, said the planned majority takeover “can be seen as a strategic risk”. He said the government must set out “crystal-clear requirements and safeguards in case of conflict”, and added: “Whoever sells critical infrastructure to foreign investors is selling the country’s sovereignty piece by piece.”

Konstantin von Notz, deputy leader of the Greens’ parliamentary group and vice-chair of the same oversight body, said the intelligence services had repeatedly pointed out that such takeovers “usually do not happen without ulterior motives”. He said there was good reason to suspect “that parts of our state’s lifelines are being bought up strategically in order to spy on us”. He called on the government to finally take “real political steps” to prevent strategic takeovers. “So far it is not doing that, and in some cases it is even acting as a door-opener,” he said.

According to Golem, the Federal Ministry for Economic Affairs approved the majority takeover of PSI by Warburg Pincus in October, subject to conditions that were kept secret.

Why it matters if you live in Germany

Most people in Germany will never hear the name PSI, but its software sits close to everyday life. The company builds process control and information systems for energy network operators, industry and logistics. Golem lists its business units as Grid & Energy Management, Process Industries & Metals, Discrete Manufacturing and Logistics. If industry figures are right that around 90 percent of large and medium-sized electricity and gas network operators in Germany use PSI software, then the systems that help manage the power and gas reaching homes and workplaces depend heavily on this one supplier.

That is why the debate goes beyond a normal business deal. The critics quoted by Golem are not mainly worried about prices or jobs. They are worried about who owns and controls software that runs critical infrastructure, and what could happen in a crisis. The approval came with conditions, but those conditions are secret, so residents cannot see what safeguards apply.

The story also shows a wider tension in German policy. The government wants international money, and Obermann points to the investment summit as evidence of that. At the same time, lawmakers responsible for intelligence oversight are warning that some foreign takeovers could weaken national security. If you work in tech, energy or industry in Germany, or at a company that might attract foreign investors, the rules that come out of this debate could affect how deals are reviewed and how long they take.

PSI also has deep local roots. Golem notes that six employees of the electrical company AEG founded it in Berlin in 1969, and its headquarters is still in the capital.

What to watch next

The first date to note is the government’s investment summit on 20 October, where it plans to meet international investors. Obermann has welcomed the summit, and it may show how Berlin intends to balance attracting foreign capital against security concerns.

The second point is investment screening law. Obermann said he would support an Investitionsprüfungsgesetz with clear criteria and a predictable timeframe, and opposition figures such as von Notz are calling for stronger action against strategic takeovers. How any such law defines critical infrastructure, and how transparent it makes the screening process, will matter for future deals like this one.

Finally, the conditions attached to the PSI approval remain confidential. Whether lawmakers push for more detail on those safeguards, and whether the claims about ministries contacting PSI’s customers get further attention, are both worth following.

Source: Golem