Bottom line: Turmoil in the Republican Party could claim a growing number of proposed Chinese acquisitions of US firms as victims, as Republican candidates turn to China bashing to curry voter favor before November elections.
Opposition grows over Terex sale to Zoomlion
Election year politics could soon claim their latest victim in M&A between the US and China, with 2 more congressmen expressing their concerns about Chinese construction equipment giant Zoomlion’s (HKEx: 1157; Shenzhen: 000157) talks to purchase US crane maker Terex (NYSE: TEX). This development doesn’t surprise me very much, especially since the latest 2 lawmakers to joint the anti-China movement are both Republicans seeking to curry favor with voters on this relatively simple issue as their own party sinks into chaos.
I don’t usually write in much detail about US politics, since the intricacies of elections aren’t that relevant to China trade. But in this particular election, growing chaos within the Republican Party could soon create anti-China rhetoric that’s louder than usual. That’s because many Americans could quickly become frustrated with the Republican Party’s infighting, which could hurt its candidates’ election prospects. That could leading many Republican candidates to try to win voter favor by rallying around the relatively safe concern about China’s growing global influence. Read Full Post…
Bottom line: Foreign investors will give China bank IPOs a cold shoulder for the rest of this year due to concerns of a bad debt crisis, potentially driving valuations even lower than their already depressed levels.
Zheshang Bank delays IPO plan
A couple of banking stories are spotlighting the rapidly fading attraction of Chinese lenders to foreign investors, who fear the banks are standing on the cusp of a bad loan crisis fueled by China’s cooling economy. The first item has Citigroup (NYSE: C) selling its 20 percent stake in China Guangfa Bank for $3 billion, after original plans to list the bank collapsed due to lack of investor interest. The second item has China Zheshang Bank also delaying plans for a $1 billion Hong Kong IPO for similar reasons.
Both developments come as Chinese banks listed in Hong Kong now trade at extremely low multiples due to concerns about their individual health and China’s broader economic slowdown. Leading lender ICBC (HKEx: 1398; Shanghai: 601398) now trades at a paltry price-to-earnings (PE) multiple of just 5, while Bank of China (HKEx: 3988; Shanghai: 601398) trades at an even lower 3.8. Read Full Post…
The following press releases and news reports about Chinese companies were carried on March 1. To view a full article or story, click on the link next to the headline.
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US Lawmakers Urge Caution on Potential Chinese Deal to Buy US Crane Maker (English article)
Citi (NYSE: C) to Sell Stake in China Guangfa Bank (Businesswire)
SAPPRFT to Strengthen Supervision of Online Video Series (English article)
Gree (Shenzhen: 000651) Products to Return to Suning (Shenzhen: 002024) Stores (Chinese article)
Alibaba (NYSE: BABA) Joined by Ma, Tsai for $500 Mln Stock Purchase (English article)
Bottom line: Vague new tie-ups by UnionPay with Visa and American Express could be followed soon by deals that could finally allow the US financial giants to offer yuan-based credit card services in China using UnionPay’s network.
Visa, UnionPay in new strategic tie-up
Just a week after Apple (Nasdaq: AAPL) launched its Apple Pay service in China, fellow US financial giants Visa (NYSE: V) and American Express (NYSE: AXP) have just announced their own new China tie-ups with the same local partner. That partner, UnionPay, has been eager to announce a growing string of alliances with major foreign financial partners, all of whom are eagerly eyeing its status as monopoly operator of China’s only network for settling domestic financial transactions.
In this case the new separate strategic tie-ups between UnionPay and Visa and UnionPay and AmEx look mostly superficial, since the US giants clearly have far more to offer than their Chinese peer in terms of technology and experience. But Visa and AmEx are probably hoping the tie-ups could serve as a spring-board to accelerate their drive into China, as each eagerly awaits a license to offer domestic payment services in the country. Read Full Post…
Bottom line: Visual China’s investments in 2 major western photo suppliers could raise some concerns about censorship, but mostly reflects a broader Chinese pattern of investment in western companies in decline.
Visual China invests in photo suppliers Getty, Corbis
Two deals that are attracting relative muted attention are seeing a Chinese company take major steps into the global photo market, reflecting the difficult state of affairs in an increasingly shared economy where the value of copyrighted material is shrinking fast. At the same time, the latest investments by Visual China (Shenzhen: 000681) are also raising some concerns about censorship, since the Chinese company will have growing influence over 2 of the world’s largest photo distributors, Corbis and Getty Images.
I do find Visual China’s sudden series of investments in copyrighted photos somewhat ironic, since China is notorious for piracy that often sees media and other publishers rampantly copy each others’ materials, often verbatim and without permission. But from a broader perspective, the current difficulties confronting big names like Corbis and Getty are the result of similar global trends that are seeing many owners of copyrighted materials undermined by free equivalents on the Internet. Read Full Post…
The following press releases and news reports about Chinese companies were carried on February 26. To view a full article or story, click on the link next to the headline.
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Visa (NYSE: V) Signs MOU with China UnionPay (English article)
Baidu (Nasdaq: BIDU) Announces Q4 and Fiscal Year Results (PRNewswire)
China to Launch Commercial 5G Service in 2020 – MIIT (Chinese article)
NetEase Reports Q4 and Fiscal Year 2015 Financial Results (PRNewswire)
Wal-Mart (NYSE: WMT) to Open 30 China Stores, Upgrade 60, Build up Cross-Border E-Commerce (Chinese article)
Bottom line: Chinese buyers may be forced to abandon their pursuit of chip makers in the west and Asia, following the latest collapse of a deal for a stake in Western Digital over concerns of a national security veto by Washington.
Unigroup scraps Western Digital investment
Globally acquisitive chip makers Tsinghua Unigroup and sister company Unisplendour are quickly becoming the belles at the ball who can’t find a mate despite their huge dowries. That’s the bottom line in this tale of China’s dream of building a global semiconductor chip giant, which has just received a major setback with word that Unisplendour has formally dropped its bid to buy 15 percent of US hard drive maker Western Digital (Nasdaq: WDC).
If Unisplendour and Unigroup are the wealthy belles at the ball in this story, then the character intent on spoiling any potential unions is Washington, which worries such marriages could threaten national security by giving Beijing sophisticated technology. Taipei is also looming as another potential spoiler, as other headlines say the government there will give unprecedented scrutiny to a series of similar proposed stake purchases of local chip makers by Unisplendour and Unigroup. Read Full Post…
The following press releases and news reports about Chinese companies were carried on February 24. To view a full article or story, click on the link next to the headline.
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Unisplendour (Shenzhen: 000398) Scraps Western Digital (Nasdaq: WDC) Stake Buy (Chinese article)
TCL (Shenzhen: 000100), Unigroup to Form 10 Bln Yuan Strategic Acquisition Fund (English article)
Parkson (HKEx: 3368) to Close Chongqing’s Top Foreign Owned Department Store (Chinese article)
Hugo Boss (Frankfurt: BOSSn) Cuts Prices to Try to Revive Weak China Sales (English article)
Trina Solar (NYSE: TSL) Acquires a Solar Cell Factory in the Netherlands (PRNewswire)
The following press releases and news reports about Chinese companies were carried on February 23. To view a full article or story, click on the link next to the headline.
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Tsinghua’s $2.6 Bln Taiwan Deals to Face Unprecedented Government Scrutiny (English article)
Huawei Debuts MateBook Notebook PC at Mobile World Congress (Chinese article)
HK Lays Out Case Against Short Seller Citron Research’s Andrew Left (English article)
ICBC (HKEx: 1398) Says Cooperating With Madrid Anti-Money Laundering Probe (HKEx announcement)
Parcel Delivery Service SF Express Prepares for Domestic IPO (Chinese article)
Bottom line: Meituan-Dianping’s IPO is likely to raise more than $2 billion and should get a strong reception when it comes, most likely by mid-year in New York, while ZTO Express’ $1-$2 billion IPO will get a cooler reception due to its steep losses.
Meituan-Dianping eyes IPO
After a quiet start to the year, the market for offshore Chinese IPOs is slowing coming to life with word of 2 listing plans that should both top the $1 billion mark. One would see leading group buying site Meituan-Dianping list, most likely in New York or possibly Hong Kong, in a deal that would probably raise at least $2 billion. The second is also Internet-related, and would see parcel delivery giant ZTO Express also raise up to $2 billion in a New York IPO.
Perhaps not surprisingly, both of these companies are losing money despite their position as industry leaders. That’s because competition has been cut-throat in both spaces, especially in the parcel delivery business that supports China’s booming e-commerce sector. Meituan and Dianping were also locked in heated competition before they merged late last year to face the current company, which still faces stiff competition from 2 of China’s leading Internet companies, Baidu(Nasdaq: BIDU) and Alibaba (NYSE: BABA). Read Full Post…
Bottom line: China is likely to lead the list of countries getting national security reviews for its US purchases over the next few years, reflecting Chinese companies’ growing pursuit of foreign technology and other sensitive expertise.
Treasury Department releases annual security report
The past year has been notable for a growing number of Chinese acquisitions in the US attracting national security reviews, and now a new report from the reviewing agency is providing some big-picture numbers about the trend. The headline figure from the new report by the US Treasury Department shows that it reviewed 24 proposed acquisitions of US firms by Chinese buyers in 2014, making China the biggest recipient of such reviews.
At the same time, the report also cast a spotlight on several other trends, including the spread of reviews outside the sensitive high-tech sector and into less conventional areas like real estate. One such deal surprised many last year, when the purchase of the storied Waldorf-Astoria hotel in New York to Chinese insurer Anbang for nearly $2 billion was subject to such a review. Read Full Post…
