Sat, Jul 06, 2019 - Page 10 News List

Chinese outbound M&A plummets as trade dispute keeps companies at home

TOUGHER STANCE:In April, one of the biggest deals ever collapsed when China Three Gorges Corp ended its takeover offer for utility EDP-Energias de Portugal


Chinese outbound mergers and acquisitions totaled US$35 billion in the first six months, the lowest tally since 2013, slowed by growing trade tensions globally, Bloomberg data showed.

That represents a 75 percent drop from the peak in the first half of 2016, when China National Chemical Corp (中國化工) agreed to buy Swiss agrochemical maker Syngenta AG for US$43 billion.

Of the first-half total, only US$6.8 billion was from US acquisitions, representing a 17 percent drop from a year earlier.

Among those deals, Chinese buyout firm Hony Capital Ltd (弘毅投資) was part of a consortium that invested US$700 million in US filmmaker STX Entertainment, the data showed.

Dealmakers say that trade tensions between the US and China, which have led to rising tariffs on both nations’ goods, have clearly affected the pace of acquisitions.

“Trade war sentiment continues to weigh on overall outbound China M&A [merger and acquisition] activity, and we expect this to particularly impact China-US deals in the near future,” Credit Suisse Group AG head of Asia-Pacific mergers and acquisitions Joseph Gallagher said.

Global uncertainty goes beyond the US-China trade dispute. Regulators including the Committee on Foreign Investment in the US and the European Commission have adopted a tougher stance in reviewing such sectors as technology and infrastructure, making it more difficult to complete transactions.

In April, one of the biggest deals ever collapsed as China Three Gorges Corp (中國三峽集團) ended its 9.1 billion euros (US$10.2 billion) takeover offer for Portuguese utility EDP-Energias de Portugal SA following concerns about regulatory approvals.

Chinese companies have started focusing more on mergers and acquisitions within the Asia-Pacific region, Gallagher said.

More than 40 percent of China outbound transactions in the first half of the year took place within the region. The biggest occurred in April, when a China-backed group agreed to invest US$5.4 billion in Mindanao Islamic Telephone Co, the Philippine telecom.

Companies have also faced setbacks when investing in certain sectors in Australia, JPMorgan Chase & Co cohead of Asia-Pacific M&A Rohit Chatterji said.

That said, they are still looking for acquisitions both domestically and in some overseas markets, Chatterji added.

“Japan, [South] Korea, India and Southeast Asia have been very busy in M&A and are poised to remain active in the coming months,” he said.

Yet the Asia-Pacific region has seen a sharp decline in activity in the first half of the year, with volumes dropping more than 30 percent.

Southeast Asia has been one of the few bright spots for M&A as companies not only from China, but globally seek to tap into the economic growth potential of Vietnam, Indonesia and the Philippines, BDA Partners senior managing director Paul DiGiacomo said.

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