China Woos Overseas Companies, Looking for Deals

Wanxiang GroupEven as Wall Street deal makers await a revival of the moribund merger market, Chinese companies are shopping abroad with their wallets out. Yet they are also facing scrutiny, particularly in Washington, as Chinese corporate buying trips coincide with a growing assertiveness in Chinese foreign policy, including the deployment in recent months of surveillance vessels and even naval destroyers and frigates in a series of territorial disputes with American allies like Japan, Vietnam and Philippines. So far this year, the dollar volume of Chinese acquisitions overseas is up 28% from the same period a year ago, according to Thomson Reuters data. That compares with a 2.8% slump in global merger and acquisition volume over all. Chinese international acquisitions are ahead for the year despite slump during 3rd quarter, as state-owned enterprises, which are the main Chinese buyers, and some private enterprises waited for a change in country’s political leadership at the Communist Party Congress in mid-November. But now Chinese buyers are back. Two deals by Chinese companies were announced this week, and bankers and lawyers say that discussions are starting or are already under way on numerous other transactions. Many of those, however, may take as long as a year to complete given China’s bureaucratic approval processes. “You will see an acceleration, you see it now,” although it would not amount to immediate flood of transactions, said André Loesekrug-Pietri, chairman and managing partner of A Capital, Hong Kong-based private equity fund. Indeed, Beijing is pushing for additional deals, and has encouraged state-controlled banking sector to finance them. “Increase in overseas investment by Chinese companies is inevitable trend,” commerce minister, Chen Deming, said at a conference two weeks ago, adding China did not want to remain overwhelmingly invested in fixed-income securities. “With foreign reserves of $3 trillion in hand,” he added, “we will not sit back and watch the assets depreciate with the third round of quantitative easing. We must inject it into the real economy and make our contribution to global prosperity”. Wanxiang Group agreed on Sunday to pay $256 million to buy most of A123 Systems, a bankrupt manufacturer of high-tech batteries. And a consortium of Chinese investors agreed on same day to pay $4.2 billion for controlling stake in American International Group’s aircraft leasing business. On Friday, Canada approved the $15 billion acquisition of Nexen, energy company, by China National Offshore Oil Corporation, or Cnooc. That deal is still pending approval by the American committee that reviews foreign investments on national security grounds, commonly known as CFIUS. A few deals may be completed this winter, but the real surge is likely to happen by next summer, bankers and lawyers said. State-owned enterprises account for as much as four-fifths of China’s overseas acquisitions by value and many of their top executives are expected to change jobs this winter as country’s new leaders start promoting their followers. While Communist Party Congress in November produced a new Politburo, new slate of government ministers and vice premiers must still be selected at the National People’s Congress in March, a process that could also slow down deals (…..)



Acerca de ignaciocovelo
Consultor Internacional

One Response to China Woos Overseas Companies, Looking for Deals

  1. Professor Uziel Nogueira says: China’s recycling of $ 3 trillion in US financial assets will inevitably be a source of friction and conflict between Washington and Beijing in the next few years. China is keen on acquiring US strategic assets, particularly companies in the area of IT and energy. US regulatory agencies will not approve such merger and acquisitions. Moreover. Chinese economic authorities are eager to reduce the huge amount of (devalued) US denominated reserves. The only cost effective way to diversify foreign reserves is to increase foreign direct investment and asset buying spree all over the world. Asia, Africa and Latin America are becoming the main markets for China’s foreign direct investment. In the case of Brazil, following the initial wave of investments in infrastructure and natural resources, China is probing the manufacturing sector, including auto production and consumer goods. The future of manufacturing in Brazil depends on foreign direct investment and expertise in order to become globally competitive. China can play a fundamental factor in this sector responsible for millions of well paid jobs.


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