Bottom line: Alibaba’s new tie-up with Suning looks logical on the surface but is likely to run into problems due to overlap in the 2 partners’ businesses, which could lead to conflicts and an ultimate dissolution of the partnership.
Alibaba, Suning in massive new tie-up
I’m officially labeling today as “O2O Day” in China, as a recent wave of online-to-offline (O2O) tie-ups reaches a crescendo with news of a $4.6 billion investment by e-commerce giant Alibaba (HKEx: BABA) in traditional electronics retailer Suning (Shenzhen: 002024). Media aren’t really commenting on the size of the deal that will give Alibaba a 20 percent stake of Suning, but to my knowledge it’s the largest such deal in China Internet history and also quite possibly the largest ever by a Chinese tech company.
All that said, I’ll be quite blunt and add my view that I don’t completely understand the logic behind this particular deal and thus wouldn’t expect it to yield very strong returns. On the surface it looks like a classic O2O deal, combining Alibaba’s strength in online retailing with Suning’s in traditional retailing. But a closer look show this deal could be set for a bumpy ride for a number of factors, which I’ll discuss shortly. Read Full Post…
The following press releases and media reports about Chinese companies were carried on August 11. To view a full article or story, click on the link next to the headline.
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Alibaba (NYSE: BABA) to Invest $4.6 Bln in Retailer Suning (Shenzhen: 002024) (English article)
Bank of Communications (HKEx: 3328) Said to Let HSBC Name Vice Chmn (English article)
The following press releases and media reports about Chinese companies were carried on August 8-10. To view a full article or story, click on the link next to the headline.
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Jin Jiang (HKEx: 2006) in Talks To Buy China-based Vienna Hotels Group (Chinese article)
JD.com (Nasdaq: JD) to Buy 10 Pct of Yonghui Superstores for 4.3 Bln Yuan (Chinese article)
Gome’s (HKEx: 493) E-commerce Unit Appoints New Management in Drive to IPO (English article)
Anbang Insurance to Make Over $1 Bln Bid for Japan’s Simplex: Sources (English article)
Youku Tudou (NYSE: YOKU) Changes Name, to Spend 10 Bln Yuan on Content Development (Chinese article)
The following press releases and media reports about Chinese companies were carried on August 5. To view a full article or story, click on the link next to the headline.
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eLong (Nasdaq: LONG) Receives “Going Private” Proposal from Tencent (PRNewswire)
Alibaba Group (NYSE: BABA) Appoints Michael Evans as President (Businesswire)
Qunar (Nasdaq: QUNR) Achieves Record Daily Hotel Room Nights Stayed (GlobeNewswire)
Toyota (Tokyo: 7203) Says Not Optimistic on China Profitability (English article)
PetroChina (HKEx: 857) Wins Dismissal of Securities Lawsuit in US (English article)
The following press releases and media reports about Chinese companies were carried on July 30. To view a full article or story, click on the link next to the headline.
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Alibaba (NYSE: BABA) Cloud Unit Sets Sights on Amazon in $1 Bln Global Push (English article)
Giant Interactive Seeks 100 Bln Yuan Valuation in China Re-Listing Plan (Chinese article)
ICBC (HKEx: 1398) VP Zheng Wanchun May Become New Minsheng Bank Chief (Chinese article)
Departing China Mobile (HKEx: 941) Workers Complain of No Raises in 10 Years (Chinese article)
China’s Great Short Seller Suddenly Turns Bullish (English article)
Bottom line: Sputtering demand for luxury goods and cars is likely to hamstring Phoenix Satellite TV’s earnings for at least the next year, as the company increasingly loses ground to new media rivals.
Sliding luxury demand undermines Phoenix
The recent slowdown in China’s luxury goods market is claiming one of its first victims in the media realm, with Phoenix Satellite TV (HKEx: 2008) warning that a sudden chill in luxury ad sales has wiped out its profits in the first half of the year. The news certainly doesn’t bode well for traditional media companies, which are a favored place for luxury goods makers to advertise. Car makers are another major source of ad revenue for these older media companies, and rapidly slowing sales in that sector also means that names like Phoenix and even some new media high-flyers like Baidu (Nasdaq: BIDU) and Sina (Nasdaq: SINA) could be looking at a difficult period ahead. Read Full Post…
Bottom line: The purchase of Micron by Tsinghua Unigroup offers a good chance for Sino-US confidence building if Washington signals it will fairly consider such a deal and Unigroup demonstrates its actions are commercially driven.
Micron sale offers chance to boost Sino-US trust
A potential mega-deal that would see China’s Tsinghua Unigroup buy leading US memory chip maker Micron Technology (Nasdaq: MU) could become a major trust-building exercise between China and Washington if handled properly, but could also quickly end in an angry war of words if the opposite occurs. Both sides need to take important steps to ensure fair trade in the case, which is sensitive because it involves the acquisition of a US high-tech leader by a company with close ties to China’s top science university.
For its part, Unigroup could take steps to show its independence from Tsinghua University, and more broadly to show that it is a commercially-focused business that doesn’t make decisions based on government orders or support. For its part, Washington could signal it is willing to consider a deal that appears to pose no threat to national security, even though it would see a major technology company taken over by a Chinese peer. Read Full Post…
The following press releases and media reports about Chinese companies were carried on July 24. To view a full article or story, click on the link next to the headline.
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Walmart (NYSE: WMT) Takes Full Ownership of Yihaodian Business in China (Businesswire)
China’s H1 2015 Mobile Internet User Base Hits 594 Mln (English article)
Tsinghua Holdings Chief Says Still in Micron (Nasdaq: MU) Talks, Hopeful on Deal (English article)
China Postal Savings Bank Seeks Strategic Investors in Run-Up to IPO (Chinese article)
Uber Partners With Xiaomi for Smartphone Sales in Singapore (English article)
Bottom line: Micron’s decision to discourage a buyout offer from China’s Unigroup is a bargaining tactic due to high regulatory risk, and Unigroup is likely to come back with a sharply raised offer in the next 2 weeks.
Micron discourages China bid
A week after splashing into the headlines, a potential bid by China’s Tsinghua Unigroup for Micron Technology (Nasdaq: MU) is being cast into doubt, with word that the leading US memory chip maker is worried such a deal would get vetoed by Washington on national security grounds. The development comes as a slight surprise to me, as I previously predicted that such a deal would ignite some controversy but would ultimately get approved by the Committee on Foreign Investment in the United States (CFIUS), which conducts reviews for national security risks.
It’s quite possible that Micron really doesn’t want to proceed with talks because it believes there’s a big enough chance that such a deal could get vetoed in Washington. But that said, it’s also quite possible that Micron could quickly resume the talks if Unigroup offers a higher price than the previous $21 per share being discussed, and that all of this is just a bargaining tactic. Read Full Post…
The following press releases and media reports about Chinese companies were carried on July 21. To view a full article or story, click on the link next to the headline.
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Micron (Nasdaq: MU) Does Not Believe Deal With Tsinghua Is Possible – Sources (English article)
Huawei’s H1 Revenue Up 30 Pct Year-on-Year at $28 Bln (English article)
Travel Site Tongcheng Launches 100 Bln Yuan Promotion, Links With Wanda (Chinese article)
Uniqlo Leaves JD.com (Nasdaq: JD) After 3-Month Trial (English article)
Bottom line: Tsinghua Unigroup could end up scrapping its plans to bid for Micron due to fears of political resistance, while a new mobile OS that it’s backing is probably getting support from Beijing but is likely to fail.
China bid for Micron meets with early resistance
The recently acquisitive Tsinghua Unigroup is in a couple of headlines today, as the politically-connected company chases its dream of becoming China’s first IT products and services giant. The first headline has the company investing $100 million in a company developing a mobile operating system (OS) that could someday rival Google’s (Nasdaq: GOOG) Android and Apple’s (Nasdaq: AAPL) iOS. The second hints at the political resistance that Unigroup could meet as it reportedly gets set to make a $23 billion bid for leading US memory chip maker Micron (Nasdaq: MU), with reports that a powerful senator has concerns about the deal. Read Full Post…
