Last week, Italian authorities revealed that China had created a daisy-chain acquisition in order to purchase a controlling interest in an Italian avionics conglomerate, Alpi Aviation. The Italian “Guardia di Finanza” are investigating three Chinese nationals and three Italian nationals for their role in the subterfuge designed to bypass the Italian arms control and tax/finance regimes respectively ( “Golden Power Law” 56/2012  and Law 185/1990  which are similar to  CFIUS/ITAR/EAR in the United States).

FSOs whose customers are in defense and intelligence sectors which utilize commercial off the shelf technologies and/or dual-use technologies will be well served to include the Italian experience in their CFIUS briefings to company management. The Italian government accuses Alpi of side-stepping and deliberately obfuscating export certification documentation to avoid government interference in the transfer of technology to China.

As discussed previously, China’s quest for intellectual property advancement takes many paths, this is yet another – the covert acquisition.

Alpi Aviation

The Italian company is located in northern-Italy in the city of Pordenone, and manufactures drones. The primary drone made by the company is the Strix UAV which weighs in at about 20 pounds with a 10-foot wingspan, is launched from a catapult in less than 10 minutes, and uses a parachute for landing. The drone is used by the Italian Air Force, and thus Alpi Aviation falls under the rules of the “Golden Power Law” restricting foreign ownership. Additionally, Alpi collaborates with Italian aviation giant, Leonardo, which is a US defense supplier and who in late-2020 saw some of their trusted insiders arrested for intellectual property theft.

China’s daisy chain acquisition of Alpi Aviation

It is important to note that the Italian police have stated unambiguously that the company was not bought as an investment by the Chinese entities. Rather, the company was purchased “exclusively for the acquisition of its technological and production know-how, including military.”

They used the daisy-chain methodology to hide the acquisition from the Italian government. It started with a Hong Kong company (MARS) and then made its way to through a number of shells until it ultimately ended up being controlled by Chinese state-owned enterprises.

China pays a premium for Alpi Aviation

The Italian police noted how in 2018, the Hong Kong buyer paid almost 90 times the estimated value of Alpi shares in order to  to garner 75% of the outstanding stock. In other words, they were willing to pay a premium of outrageous proportions to induce the company to skirt the export control laws of Italy. The intent, as intimated above, was with 75% ownership, there would be no corporate resistance to the planned relocation of the Alpi manufacturing to the city of Wuxi (located about 150 km from Shanghai) and a noted technological hub within China.

China threat intelligence analyst, Devin Thorne, of Recorded Future, posted on his personal Twitter account a comprehensive diagram which depicts the multi-level daisy-chain discussed in the Italian announcement.


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Christopher Burgess (@burgessct) is an author and speaker on the topic of security strategy. Christopher, served 30+ years within the Central Intelligence Agency. He lived and worked in South Asia, Southeast Asia, the Middle East, Central Europe, and Latin America. Upon his retirement, the CIA awarded him the Career Distinguished Intelligence Medal, the highest level of career recognition. Christopher co-authored the book, “Secrets Stolen, Fortunes Lost, Preventing Intellectual Property Theft and Economic Espionage in the 21st Century” (Syngress, March 2008). He is the founder of