Bottom line: The US could veto the purchase of brokerage Cowen by a Chinese energy firm, and could also block Ant Financial’s purchase of MoneyGram under tougher scrutiny by the Donald Trump administration.
US set to block more Chinese purchases?
Just days after President Donald Trump made his first veto of a Chinese deal in the US, two other deals appear to be running into trouble for similar reasons, though it’s too early to call either dead just yet. In both instances, the buyers, Ant Financial and CEFC China Energy, have refiled proposals to regulators for their purchases of two financial services firms, MoneyGram (NYSE: MGI) and Cowen Inc. (Nasdaq: COWN), respectively. Both need approval from the powerful Committee on Foreign Investment in the United States (CFIUS), which reviews all such cross-border deals for national security considerations.
The regulatory stalling of those two deals comes just days after Trump officially killed another deal for a China-backed bid to buy Lattice Semiconductor (Nasdaq: LSCC), (previous post). So now people are trying to draw connections between these developments. Since that veto, China’s official Xinhua news agency has come out with an editorial over the weekend saying Trump is only hurting America by blocking such deals, which are part of the natural ebb and flow of global trade. Read Full Post…
Bottom line: The US is likely to take a tougher stance towards Chinese M&A of politically sensitive companies following Trump’s veto of a major deal, but in such cases will still need to justify the national security risk.
Trump vetoes sale of chipmaker
In a move that is sure to make major waves but wasn’t completely unexpected, Donald Trump has made his first big statement on the sale of US high-tech companies to Chinese buyers by formally blocking a relatively large deal that was pending for quite some time. Followers of the space may recognize I’m talking about chipmaker Lattice Semiconductor (Nasdaq: LSCC), which was set to be bought by a China-backed private equity firm in a deal that has dragged on for more than a year.
Some might argue that this marks a big setback for cross-border M&A between China and the US in the high-tech realm, though the decision does seem consistent with what we’ve seen in the past. I’ll recount some of the deals we’ve seen previously vetoed for similar reasons, which usually involves defense applications. Perhaps the major difference here is that Trump has made the first such move quite early in his presidency, which could presage a more aggressive position for national security reviews in future deals. Read Full Post…
Bottom line: JD.com’s Thai joint venture looks like a smart move into Southeast Asia, though it shouldn’t move too aggressively abroad and instead focus on becoming profitable.
JD.com tests out Thailand
China’s big Internet companies have a pretty varied record for expanding abroad. At one extreme there’s Alibaba(NYSE: BABA), which is using its big cash pot to buy a wide range of assets concentrated mostly in East and South Asia. Tencent(HKEx: 700) is in the middle, mostly buying strategic stakes in game-related companies, while Baidu(Nasdaq: BIDU) appears to have mostly abandoned the market after a few half-hearted attempts at global M&A and trying to open search sites in other countries.
And then there’s Johnny-come-lately JD.com(Nasdaq: JD), which admittedly has a far shorter history and is also the only one of the four leading Internet companies that’s still losing money. But that doesn’t mean that JD doesn’t have cash, and now it appears the company is looking to make its biggest splash abroad to date with the formation of a joint venture in Thailand. Read Full Post…
Bottom line: Alibaba’s launch of its popular Tmall into several markets with large Chinese populations shows it is still looking for a strong overseas formula, underscoring its dependence on China for the foreseeable future.
Tmall marches into Singapore
E-commerce juggernaut Alibaba (NYSE: BABA) is making its latest global expansion noise with word that it will launch a version of its popular B2C Tmall online marketplace targeting overseas buyers in Southeast Asia. I have to admit I’m not completely sure about the significance of the move, since the company already has a wide ranging network covering a number of overseas markets through its AliExpress and Lazada services.
The bottom line seems to be that Alibaba is taking a somewhat fragmented and multi-brand approach to the overseas market, as it searches for formulas for success in an area that so far has been somewhat elusive. The company only derives about 10 percent of its revenue from overseas operations at the moment, despite numerous attempts to develop markets outside China. Read Full Post…
Bottom line: Lattice Semiconductor’s sale to a Chinese buyer stands a 50-50 chance of getting national security clearance, benefiting from warming ties between the US and China and lack of defense-related technologies involved.
Lattice still trying to sell to Chinese buyer
More than a year after it first became an acquisition target for chip-hungry Chinese buyers, Lattice Semiconductor (Nasdaq: LSCC) is back in the headlines again with what looks like a last-ditch effort at salvaging a sale. Lattice is clearly a mid-sized maker of microchips that fits the profile of what Beijing would like to buy, with a market cap of about $840 million, as China tries to build up its own semiconductor sector that can compete with global giants like Intel (Nasdaq: INTC), Qualcomm (Nasdaq: QCOM) and TSMC (Taipei: 2330).
But western governments are wary of China’s aggressive ambitions, which include generous funds for M&A of Asian and western chip makers. A deal first announced more than a year ago saw one of the most aggressive buyers, Tsinghua Unigroup, buy a small stake in Lattice, but then fail to parlay that into an outright acquisition. Now another group, Canyon Bridge Capital Partners, is getting ready to make a third appeal for its plan to purchase Lattice in a filing to the regulator that reviews such deals for national security considerations. Read Full Post…
Bottom line: A Chinese group’s plan to buy the Chicago Stock Exchange could get vetoed by the US securities regulator over concerns about the buyer’s inability to prevent the market from becoming a breeding ground for financial abuses.
SEC takes time on Chicago Stock Exchange sale review
Nearly a year and a half after it was first announced, the sale of the Chicago Stock Exchange to an obscure Chinese buyer is still awaiting approval, in what would be a relatively landmark deal in the finance space. I’ll admit I was a bit surprised to read that this particular deal was still pending, as I figured it was either dead or had closed by now.
The deal announced in February last year would see a group led by Chongqing Casin Enterprise Group purchase one of America’s oldest but also most irrelevant stock exchanges. Some politicians had voiced concerns about the deal for the usual reasons, namely the exchange could provide a foothold for China to wreak mischief in US financial markets. But CFIUS, the agency that reviews deals for national security concerns, previously approved the deal, leading all of us to believe it would get done. Read Full Post…
Bottom line: LeEco’s scrapping of its Vizio purchase may be due to currency controls, but should be welcome by the company as a cash conserving move, and could presage a withdrawal of its investment in electric car maker Faraday Future.
LeEco scraps Vizio purchase
The first major pullback for cash-challenged LeEco (Shenzhen: 300104) is coming in the US, where the company is confirming the abandonment of its $2 billion agreement to buy no-name TV maker Vizio. At the same time, unconfirmed reports citing knowledgeable insiders are saying the company is cutting one-third of its headcount in the US. It’s not really clear if this pair of items are related, though both are certainly cost-cutting moves in a market where costs are quite high.
The next big move perhaps will see LeEco abandon its backing for Faraday Future, the electric car-making venture that’s building a $1 billion plant near Las Vegas. That deal is a bit more futuristic than the Vizio TV deal that’s now being abandoned, and is probably a bigger pet project of LeEco founder Jia Yueting. But the reality is that the company needs to conserve cash, and also that China’s foreign exchange regulator is making life difficult for anyone who wants to move money out of the country. Read Full Post…
Bottom line: IDG Capital is likely to buy out the venture funding business of US affiliate IDG in the next year, setting the stage for the emergence of China’s first global venture capital firm.
IDG Capital roars with purchase of US parent
A sort of “mouse that roared” story is in the headlines today, with word that US tech finance and information giant International Data Group (IDG) has been bought out by its China affiliate. The China affiliate, IDG Capital, is actually teaming up with another major local partner, China Oceanwide Holdings, to purchase Boston-based IDG, whose assets include the well-respected market research firm International Data Corp (IDC), as well as PCWorld Magazine. Read Full Post…
Bottom line: Seagate’s closure of its Suzhou factory, combined with its earlier formation of a Chinese technology-sharing joint venture, reflect the changing approach away from local manufacturing that western tech firms are taking towards China.
Seagate closes Suzhou factory
New reports are saying that hard disk drive maker Seagate (NYSE: STX) is closing down a factory in the eastern city of Suzhou, as part of a restructuring plan to revive its operations. Such a development isn’t huge news, since the global semiconductor sector is undergoing a major consolidation.
But this particular closure also comes just months after Seagate announced a new tie-up with Chinese partner Sugon to tap the local market for IT products and services. So the bigger question becomes: What’s the meaning of this factory closure and the newer joint venture, and what’s the outlook for semiconductor and high-tech equipment manufacturing in China? Read Full Post…
Bottom line: Chinese smartphone brands with local production are most likely to survive upcoming price wars they are exporting to India, while Nokia’s new smartphones are unlikely to make any inroads in China over the next 2-3 years.
China exports smartphone price wars to India
A case of deja vu is rapidly shaping up in India, where Chinese smartphone makers have flocked over the last two years in search of growth outside their overheated home market. In this case media are reporting that Chinese brands have surged to take half of the Indian market by dumping millions of their cheap look-alike Android phones into the country.
Meantime back in their own home country, nostalgia has become the word of the moment with word that Nokia (Helsinki: NOK1V) has officially re-entered a market it once dominated. Nokia joins a number of other faded brands to rediscover China, including former arch-rival Motorola, which has become the smartphone flagship of the brand’s current owner Lenovo (HKEx: 992). Read Full Post…
Bottom line: Alibaba’s Taobao marketplace is likely to be included on the annual US “notorious markets” for piracy list for the next 1-2 years, after its return to the list this year.
Alibaba’s Taobao gets coal for Christmas
Christmas may be just around the corner, but the folks at e-commerce giant Alibaba (NYSE: BABA) won’t be feeling much holiday cheer this year. That’s because Alibaba’s hugely popular Taobao C2C marketplace has just been included on the latest edition of Washington’s annual “notorious markets” for piracy list, in a sharp rebuke to the company. The move reverses an earlier decision by Washington 4 years ago, when it took Taobao off the list to acknowledge its efforts to fight the problem. Read Full Post…
