Deals: Hawker Sputters, PetroChina in Canada 交易：豪客比奇收购案失败，中石油建设加拿大基础设施
A couple of major overseas moves are in the headlines today, spotlighting the fact that Chinese firms are becoming increasingly adept at relatively simple resource deals, even as they still lack sophistication to do M&A in other, more complex sectors. In the former category, oil major PetroChina (HKEx: 857; Shanghai: 601857; NYSE: PTR) has reached a deal to co-develop a $3 billion oil pipeline in Canada with a local partner, in the largest project of its kind by a Chinese firm to date. In the latter, a white-knight rescue bid by a relatively obscure Chinese firm for bankrupt plane maker Hawker Beechcraft has collapsed, leaving the US company no choice but to work out a reorganization plan with its creditors.
Let’s look at PetroChina first, not so much because it’s an interesting deal but because of its broader implications for another more sensitive Canadian deal that has rival Chinese oil major CNOOC (HKEx: 883; NYSE: CEO) making a $15 billion bid for Canada’s Nexen (Toronto: NXY). (previous post) The deal will see a unit of PetroChina team with TransCanada to develop the new pipeline, which would deliver oil coming from new oil sands projects in Alberta province. (English article) Each side will hold 50 percent of the venture.
It’s interesting that this project seems to have attracted little or no controversy, at least not yet, perhaps because it doesn’t involve the sale of actual resources but instead is simply an infrastructure project. The announcement does seem to come at a good time for China, as it seems to offer good will just as the administration of Canadian Prime Minister Stephen Harper considers whether or not to approve CNOOC’s bid for Nexen.
This PetroChina deal seems at least partly aimed to show that China wants to help Canada develop its energy resources, and not just come in and ship out those resources to China. Perhaps this deal will help to convince Harper to approve the deal, which I’ve already said stands an 80 percent chance of approval if Beijing can send a few more positive signals like this.
Meantime, let’s look quickly at the Hawker Beechcraft deal, which surprised many when reports first emerged in July that a relatively obscure company named Superior Aviation Beijing was making a bid worth up to $1.8 billion for the struggling US maker of small planes. (previous post) Superior’s long-shot bid officially crashed and burned a couple of weeks ago, leaving the company to reorganize on its own. (English article) The fact that no one else ever made a serious bid for Hawker shows that Hawker was probably unsalvageable in its current form, and Superior Aviation should probably consider itself lucky that it wasn’t able to close a deal.
The Hawker bid followed a similar template that has seen Chinese companies go out and chase sickly western assets that nobody else wanted. In many cases the Chinese firms are relatively obscure and lack the financial resources and experience to close such deals. Such was the case with deals by small Chinese firms looking to buy insolvent car makers Hummer and Saab over the last 3 years. The fact that these bids failed is probably a good thing because the Chinese firms’ chances of success were almost zero, and such troubled assets always come with many accompanying problems that make them very difficult to close down.
We can probably expect to see more of these misguided bids by obscure Chinese companies for sickly big-name global assets over the next few years, with most such bids likely to fail. Meantime, the PetroChina pipeline deal also marks what could perhaps become a growing trend that sees China try to show the west that it wants to be a partner in developing the infrastructure that will benefit global energy markets.
Bottom line: PetroChina’s new partnership to build a Canadian oil pipeline could mark a shift toward more global infrastructure development by Chinese resource firms.
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