Italy's government said it would apply special vetting powers on the planned acquisition of Molmed by Japan's AGC, sending shares in the Italian biotech company shares down 10% on Tuesday.

After the coronavirus outbreak, Rome bolstered so-called "golden power" legislation against foreign takeovers by extending it to more sectors - including banking, insurance, health and food - and applying it to investors from other European Union countries.

The rules give the government the power to halt or impose conditions on investments made by foreign companies in industries or infrastructure deemed of strategic interest.

In March AGC launched a takeover bid for Molmed in a deal worth up to 240 million euros.

Molmed is focused on research, development, production and clinical validation of gene and cell therapies for the treatment of cancer and rare diseases.

Fininvest, the holding company of the family of former Prime Minister Silvio Berlusconi, agreed to tender its 23% stake in Molmed.

Rome did not give details on what it would do with regards to the Molmed-AGG deal.

Two sources close to the matter said Rome could ask AGC to agree to certain conditions for the takeover, but would not halt the offer, which is set to close on July 24.

Molmed declined to comment.

The government said it would also apply its vetting powers to the merger between Banca Farmafactoring and DEPObank, which the specialised lender bought from a group of private equity firms.

Banca Farmafactoring's main shareholder is private equity firm Centerbridge with a 12% stake.

The government also said it would use its special powers "in the form of prescriptions" in the planned acquisition of IT services provider Engineering by private equity firms Bain Capital and NB Renaissance.

(Reporting by Elisa Anzolin and Elvira Pollina; editing by Jason Neely)