Bottom line: Midea should limit its new plan to buy a major stake in Germany’s Kuka to a strategic partnership, and avoid temptation to help Kuka lower costs by moving major parts of its manufacturing to China.
Midea eyes Germany’s Kuka
A recent overseas M&A binge by top Chinese home appliance makers is taking a somewhat unexpected turn, with word that Midea (Shenzhen: 000333) is pursuing a deal to buy a major stake or even outright purchase Germany’s Kuka (Frankfurt: KU2). In this case the deal comes as something of a surprise, since Kuka isn’t an appliance maker but instead manufactures industrial robots that Midea is using to modernize its production lines.
This particular deal could carry a price tag of more than $1 billion, and would come just 2 months after Midea’s smaller deal to purchase the home appliance business of scandal-tainted Japanese electronics giant Toshiba (Tokyo: 6502). (previous post) This latest deal is logical, though could also carry a large degree of risk due to previous poor results for Chinese companies that bought manufacturers in the tough French and German markets. Read Full Post…
Bottom line: Dangdang’s latest buyout offer is likely to meet with minority shareholder resistance due to its sharp downward revision, while Momo is also likely to lower its earlier buyout price if and when it announces a final offer.
Dangdang gets lowered buyout offer
After pausing briefly last week, the train of publicly-traded Chinese firms leaving New York has resumed with the receipt of a new offer for faded e-commerce company Dangdang (NYSE: DANG). In this case it’s significant that Dangdang has announced a revised buyout offer from its founders, since that means the deal most likely has the necessary funding and is likely to move ahead. But it’s also significant that this revised offer is sharply lower than 2 earlier offers for the company, one from its founders and one from a rival bidder.
Next there’s social networking app operator Momo (Nasdaq: MOMO), which has remained mum on its own pending buyout bid in its latest quarterly results. That doesn’t mean the bid is necessarily on hold, especially after word emerged last month that e-commerce giant Alibaba (NYSE: BABA) was joining the buyout group. But Momo’s shares now trade well below their earlier buyout price, and I suspect that if and when it finally announces a concrete offer the price will also be revised downward from the earlier bid. Read Full Post…
Bottom line: A brouhaha that has seen Alibaba suspended from an anti-counterfeiting group just a month after joining is an embarrassment but won’t have a major longer-term impact on the company’s stock.
Tiffany quits anti-piracy group after Alibaba joins
A brouhaha over the admission of Alibaba (NYSE: BABA) to a leading US anti-piracy coalition has taken a somewhat strange twist, with word that the group has formally suspended the e-commerce giant just a month after it joined. The development occurred after several of the International Anti-Counterfeiting Coalition’s (IACC) members quit after the group accepted Alibaba, including the latest defection last week by Tiffany & Co.
Tiffany’s defection followed earlier withdrawals from the IACC by 2 other luxury goods makers, Michael Kors and then Gucci a short time later. (previous post) The coalition’s members were unhappy because of Alibaba’s previous status as operator of marketplaces with rampant trafficking in counterfeit goods, even though the company has pledged to strongly step up its fight against such trade. Read Full Post…
Bottom line: More big global brands are likely to leave a major US anti-piracy group after its admission of Alibaba, which will suffer some negative publicity as it tries to clean up its sites of trafficking in fake goods.
Gucci quits US anti-piracy group after Alibaba joins
How would you feel if your former foe who constantly stole from you suddenly applied for membership in one of your favorite clubs? The answer is “probably not very happy”, which has led luxury goods giant Gucci to abruptly resign from a global anti-counterfeiting group after it admitted Chinese e-commerce leader Alibaba (NYSE: BABA) as its newest member.
This pair of companies have plenty of bad blood between them due to Gucci’s allegations of pirated goods being sold over Alibaba’s popular online marketplaces. Gucci parent Kering has sued Alibaba twice over the issue, most recently a year ago in New York, accusing the Chinese company of knowingly assisting in trade of counterfeit goods over its platforms and profiting from the process. Read Full Post…
Bottom line: A new strategic partnership between Amazon and Chinese retailer Gome could expand later this year into an equity alliance that would see the former buy about a fifth of the latter for around $500 million.
Gome ties with Amazon
A year after getting dumped by private equity giant Bain, fading electronics retailer Gome (HKEx: 493) is being courted by yet another big western name, with word of a new major tie-up with global e-commerce leader Amazon (Nasdaq: AMZN). This particular tie-up is most intriguing due to the timing, which comes after reports emerged last year saying Gome’s controversial founder Huang Guangyu might soon be freed from prison after serving about half of a 14-year sentence for bribery and insider trading.
Reports of the early release, combined with a buyout of Bain’s 5 percent stake last year, hint that Huang may be making new plans for Gome if and when he emerges from prison soon. This new tie-up with Amazon suggests that a major investment from the US e-commerce giant could be in the offing, which could be part of Huang’s plan to breathe new life into his faded retailing empire. Read Full Post…
Bottom line: A sell-off of JD.com shares after announcement of a big bond issue and a lukewarm debut for Yintech’s New York IPO reflect growing investor skepticism towards US-traded Chinese stocks due to the nation’s economic slowdown.
JD shares tank on mega bond sale
China startups may be all the rage among private equity investors in Asia, but they’re quickly losing their luster for smaller US-based investors. That seems to be the bottom line, following a lukewarm reception for the new IPO by a metals trading platform operator called Yintech (Nasdaq: YIN), and a plunge in shares of e-commerce giant JD.com (Nasdaq: JD) after it announced a major new fund-raising plan.
Neither of these stories surprises me too much, since China’s economy is standing on the cusp of a major slowdown that is likely to severely crimp all companies’ growth. But that said, it’s also noteworthy that private equity investors are still pumping billions of dollars into companies like Ant Financial and Didi Kuaidi even as sentiment cools on Wall Street. Read Full Post…
Bottom line: Alibaba’s new cloud tie-up shows that Korea is a primary market for its global expansion, while the new $4.5 billion funding for its Ant Financial affiliate could be followed by an IPO within the next 12 months.
Alibaba in Korea cloud initiative
E-commerce giant Alibaba (NYSE: BABA) is in a couple of major headlines today, led by word that its Ant Financial affiliate has just raised a whopping $4.5 billion in only its second-ever funding round. That particular story has been rippling through the headlines for a few weeks now, and is most notable because the deal is finally done and is triple the company’s original fund-raising target.
The other headline has Alibaba itself in a new deal to launch cloud computing services in South Korea, working in a partnership with a unit of local telecoms giant SK Telecom (Seoul: 017670). This particular deal is interesting because it represents Alibaba’s recent search for global growth stories, in a bid to satisfy investors worried about a slowdown in its home China market. Read Full Post…
Bottom line: Baidu’s spin-off of its professional video service continues its plan to separate newer loss-making units from its core search business, and could fuel strong profit acceleration for the New York-listed company by year end.
Baidu break-up continues with video unit spin-off
The slow motion break-up of online search leader Baidu (Nasdaq: BIDU) marches on, with word that the company is spinning off its professional video service into a separate company. The move will see the service, Baidu Video, receive 1 billion yuan ($150 million) in new investment as it takes on 2 more partners.
This particular move comes just a week after Baidu detailed a major corporate reorganization that was also aimed at separating out its older and highly profitable search services from its newer businesses, most of those losing big money. (previous post) As a relatively neutral observer, I have to say this particular strategy looks smart as it will help investors see more clearly how Baidu’s different businesses are doing and invest in ones where they see the best potential. Read Full Post…
Bottom line: Yum may sell control of its China unit to Chinese partners in a bid to become more local, while ZTE’s plans for a Nubia IPO reflect a growing emphasis on its younger, trendier smartphone brand.
China set to take control of local KFC?
A couple of big IPO stories are rippling through the headlines, led by word that an investor group headed by China’s sovereign wealth fund could buy control of the China unit of Yum Brands (NYSE: YUM), owner of the KFC fast-food chain, as it gets set for a spin-off and separate listing. This particular news marks a shift from previous reports that implied Yum would retain control of its China unit, even as it sold a major stake to big institutional investors.
While the Yum listing is likely to come later this year, another smaller but interesting deal has telecoms giant ZTE (HKEx: 763; Shenzhen: 00063) saying it plans to spin off and separately list its smartphone division that manufactures under the Nubia brand in the next 3 years. That hints that ZTE may be re-thinking its smartphone business, and perhaps preparing to slowly de-emphasize its older ZTE-branded phones in favor of its younger, higher-end Nubia line. Read Full Post…
Bottom line: Asos’ China retreat is due to the country’s extremely competitive e-commerce landscape, and shows that western retailers need to devote significant resources to succeed in the market.
Asos bows from China
In what looks like a first for a major western retailer, British fashion seller Asos (London: ASC) has officially pulled the plug on its China operations. Some might say that’s nothing new, since much bigger names like supermarket operator Tesco (London: TSCO) and electronics seller Best Buy (NYSE: BBY) have made similar moves in the last 5 years after failing to find a big enough audience among Chinese consumers.
But Asos is a different case, since it’s one of a growing number of western retailers that are choosing to come to China as a pure e-commerce plays, in a bid to save the huge costs involved with traditional stores and also take advantage of the nation’s online shopping craze. The problem is that China’s e-commerce craze has also attracted thousands of other retailers, and Asos couldn’t find a way to differentiate itself from the crowd. Read Full Post…
Bottom line: Alibaba’s new co-production deal with Paramount suggests the pair could soon form an equity alliance, following Paramount’s February announcement that it may sell a stake of itself to a strategic partner.
Alibaba Pictures invests in 2 Paramount films
The hyperactive Alibaba (NYSE: BABA) is in yet another major headline today, forming a tie-up to co-produce 2 of the most successful movie franchises from Hollywood giant Paramount. But what’s most intriguing about this latest deal is the timing, since it comes just over a month after Paramount announced it may be preparing to sell a stake of itself to a Chinese buyer.
Paramount announced that intent in late February, as part of a broader move by Hollywood to cash in on China’s booming box office that is the world’s second largest behind only the US. (previous post) Paramount and the other Hollywood studios also like the fact that Chinese buyers are often willing to pay big premiums for big-name brands, which should theoretically help to boost the stock prices of those foreign companies. Read Full Post…
