Fri, Apr 10, 2020 page11

• Asian tycoons hunt for bargain deals after rout

  CASH IS KING: Cash-rich conglomerates such as Victor Li’s CK Group are in a position to invest, as other firms struggle to survive the COVID-19 crisis, an analyst said

  • Bloomberg
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  Asian tycoons are looking to snap up assets pummeled by the COVID-19 pandemic at bargain prices, but they are also facing hurdles as more governments seek to deter foreign takeovers of local firms.

  Top executives of companies based in China, Hong Kong and Singapore have over the past three months told investors that they are looking for acquisitions.

  These executives include Victor Li (李澤鉅), who took over Hong Kong’s CK Group from his father, Li Ka-shing (李嘉誠), two years ago, and billionaire Guo Guangchang (郭廣昌), founder of the predatory Chinese conglomerate Fosun Group (復星集團).

  Major stock indices in the US, Europe and the Asia-Pacific region all plunged about 20 percent in the first quarter — their worst rout since the 2008-2009 global financial crisis — making everything from retail chains to hotels and property developers attractive to suitors.

  Cash-rich conglomerates such as Victor Li’s CK Group are in a position to invest as others struggle to survive the pandemic, said Jonathan Galligan, group deputy head of research at securities brokerage CLSA Ltd.

  “This is a tremendous opportunity for any company with cash,” Galligan said. “If you look at what’s happened in the global market, right now cash is king.”

  Victor Li, 55, now chairman of CK Hutchison Holdings Ltd (長和集團), CK Asset Holdings Ltd (長江實業) and Cheung Kong Infrastructure Holdings Ltd (長江基建), on March 19 told analysts that the group’s cash flow and balance sheet are strong, and that the effects of the coronavirus offers “opportunities to look at new acquisitions.”

  He did not elaborate.

  The market rout has come as Victor Li’s biggest test since his father passed on the baton in May 2018. Li Ka-shing, 91, went to Hong Kong as a refugee, but went on to transform a plastic flower business into a telecommunications-to-ports global empire.

  CK Hutchison — the main flagship, whose stock has tumbled 22 percent this year — said that it had as of December last year HK$145 billion (US$18.7 billion at the current exchange rate) in cash and liquid investments.

  That is 3.6 times its short-term debt and 1.7 times its debt maturing over this year and next year, S&P Global Ratings said.

  The group last year spent US$5.5 billion acquiring assets, including British pub operator Greene King PLC, following about US$15.2 billion of purchases the previous year, data compiled by Bloomberg showed.

  The chaos triggered by the coronavirus poses another challenge for prospective buyers. Governments are pre-emptively trying to ward off predatory buying, with policymakers from Australia to Spain, Italy and Germany introducing or considering stricter rules to help shield strategically important domestic companies.

  The regulatory barriers could make some acquisitions more difficult, far from the days when Chinese conglomerates such as HNA Group Co (海航集團) loaded up on debt and paid top dollar for assets such as US technology firms and European aviation businesses.

  “For companies like [Victor] Li’s, they depend very much on acquisitions to grow, and that could be a big challenge in the long term,” University of Hong Kong management and strategy professor Jackie Yan said.

  However, Victor Li is no stranger to being rejected by overseas regulators.

  Australia in 2018 rejected CK Group’s bid to buy APA Group, an operator of gas pipelines, for A$13 billion (US$8.18 billion at the current exchange rate) on national security concerns.

  Had it been successful, that would have been CK Group’s biggest overseas purchase.
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