A new class of Chinese dealmaker has joined the global heavyweights of mergers and acquisitions — business leaders with the connections, confidence and backing to pursue their own multibillion-dollar takeovers, and even gatecrash others.
In an otherwise lacklustre quarter for M&A activity, it was the bids and bargaining from China’s biggest companies that drove the country’s cross-border deals to record highs, even as previously red-hot US takeover activity fell to a two-year low.
China’s appetite for overseas assets helped push the overall value of cross-border M&A to $311bn — representing a record 46 per cent of the $682bn in deals in the first quarter, according to Thomson Reuters data. Chinese deals, at $101bn, accounted for roughly a third of that cross-border activity, an all-time high.
They also took China’s percentage of total global M&A activity to its highest in any quarter: 15 per cent of deals in the period involved an overseas Chinese acquirer.
China’s dealmaking surge helped to mask a 29 per cent fall in deal value in the US, to $256bn, as M&A activity was slowed by sharp market volatility in January. Europe’s first quarter values improved on the year before, however, rising 11 per cent to $181bn.
For a handful of politically-connected Chinese business leaders — such as Anbang Insurance’s Wu Xiaohui, ChemChina’s Ren Jianxin and HNA Group’s Chen Feng — the takeover successes of early 2016 have served as an induction into an elite club of global dealmakers: those capable of consecutive billion-dollar deals in a matter of months.
In several cases, the businessmen have asserted their status with higher bids for existing takeover targets — upending previously agreed deals, often with superior, all-cash offers.
That tactic was best highlighted in March by Anbang’s chairman, who stepped into a months-old deal between Starwood Hotels & Resorts and rival US hotel group Marriott International. Earlier this week, an emboldened Mr Wu raised his all-cash offer to $14bn for Starwood, heaping greater pressure on Marriott to increase its cash-and-stock bid. Despite repeated questions about the source of his funding and warnings from the Chinese insurance regulator, Mr Wu then attempted to put to rest questions over his ability to pay, telling Chinese media he had Rmb1tn in assets.
Anbang’s original bid for Starwood came just one day after it had secured a $6.5bn deal for 15 prime US luxury hotel properties owned by private equity group Blackstone.
“You get extra points for certainty right now because we are closer to a ‘risk-off’ than a ‘risk-on’ market,” explains Michael Carr, global co-head of M&A at Goldman Sachs, who says this partly explains why Chinese companies are winning the fiercest bidding wars.
In February, ChemChina succeeded in the the biggest outbound acquisition a Chinese company has made to date with its $44bn all-cash buyout of Swiss agrochemical company Syngenta — the largest-ever takeover in the chemical sector. It came a mere four months after chairman Ren finalised a $7.7bn takeover of Italian tyremaker Pirelli.
Chinese aviation and logistics conglomerate HNA Group also returned to the market in the first quarter, agreeing to buy US electronics distributor Ingram Micro for $6bn in February. Just months earlier, group chairman Chen Feng had added US-listed aircraft lessor Avolon Holdings for $2.6bn and closed a $2.8bn takeover of airport operator Swissport last year.
But this spate of deals has not been solely based on the personalities of the chairmen themselves. Experts say low interest rates, coupled with a growing reliance on in-house investment banking expertise on the mainland, have enabled the wave of first-quarter deals.
“Now they have the liquidity and sophistication to do this,” says Raghu Narain, head of corporate advisory at Natixis. “These leaders have been able to amalgamate the resources that have allowed them to go out.”
China’s central bank has cut interest rates six times during the past year and a half, lowering the cost of bank financing. In addition, mainland regulators have recently granted permission, or so-called “road passes”, for multiple companies to hunt down the same takeover target.
In November, Beijing Enterprises Water Group, Beijing Capital Group and China Everbright International, were all found to be competing for German waste management company EEW. Beijing Enterprise won the contest in February for $1.6bn.
Miranda So, a Hong Kong-based partner at Davis Polk & Wardwell, says: “A ‘road pass’ may not mean exclusivity for a Chinese buyer, as we have seen cases where a second Chinese buyer enters bidding for the same asset.”
Date Target Acquirer Activity Value ($bn)* Feb 2 Syngenta (US) ChemChina Chemicals 46.8 Mar 14 Starwood Hotels & Resorts (US) Anbang Insurance-led consortium Hotels and lodging 15.2 Mar 13 Shenzhen Metro (China) China Vanke Transportation & infrastructure 9.2 Mar 23 YTO Express (China) Dalian Dayang Trands Transportation & infrastructure 8.8 Mar 13 Strategic Hotels (US) Anbang Insurance Hotels & lodging 6.5 Feb 17 Ingram Micro (US) Tianjin Tianhai Invest Technology 6.3 Jan 15 GE’s appliance business Qingdao Haier Household and personal products 5.4 Feb 25 GreatWall Info Industry (China) China Greatwall Computer Technology 4.9 Jan 26 Terex Corp (US) Zoomlion Machinery 4.7 Mar 23 Liaoning Zhongwang (China) CRED Metals & Mining 4.7 Mar 14 CITIC Real Estate (China) China Overseas Land & Invest Real estate 4.6 Jan 12 Legendary Entertainment (US) Dalian Wanda Media & entertainment 3.5 Notes: * Includes debt Source: Thomson Reuters Even as M&A activity slumped in the US, the trend of large corporates seeking to lower their US tax bills by acquiring an overseas-headquartered rival remained prevalent.
For example, US conglomerate Johnson Controls agreed a $20bn reverse takeover of Ireland-based Tyco International — a deal that would have the same effect as a so-called ‘tax inversion’.
Meanwhile, US company IHS agreed to combine in a $13bn all-stock deal with UK-based financial information provider Markit in a deal that would create a corporate information powerhouse based in London — and also lower its tax bills.
Anu Aiyengar, JPMorgan’s head of M&A in North America, said deal activity had slowed down in certain sectors such as healthcare and tech, which were very busy in 2015, while others — such as financial services and industrials — have picked up.
Bankers say one area that remains ripe for further dealmaking is the consumer sector, which produced some of last year’s blockbuster transactions but saw relatively little dealmaking activity in the first quarter.
Jens Welter, head of consumer and retail group at Credit Suisse, says the buyers are there.
“Strategic acquirers continue to be very confident and those that pursue a specific strategy are being rewarded when it comes to M&A . . .” he says. “Overall, the larger deals that captured the headlines last year were highly complex and relied on intricate structures. Some of that will continue to happen in highly consolidated sectors.”
Premier Foods’ tie-up with Nissin not a frustrating action to McCormick bid, sector lawyers say
* Takeover Panel unlikely to find fault with Nissin stake build
* Conditional commercial arrangement should not raise hackles
* Nissin stake could prevent an eventual squeeze-out
Nissin Food Holdings’ [TYO:2897] purchase of a 17.3% stake in Premier Foods [LON:PFD], amid McCormick & Company’s [NYSE:MKC] repeated approaches to Premier, does not appear to violate the UK takeover code, sector lawyers said.
The Takeover Panel would be unlikely to scrutinise a sale of existing shares, and the conditionality of the proposed commercial partnership between Nissin and Premier means it would not get in the way of a joint Premier-McCormick operation, said the first sector lawyer.
But a source close to the situation said it is “extraordinary that the [Takeover] Panel has not said anything”. Premier’s involvement with Nissin is “calculated to frustrate” McCormick, according to the source, who noted media reports of annoyance among Premier shareholders that McCormick’s previous offers had not been entertained.
McCormick privately approached Premier with a 52p/share all-cash offer on 12 February, but was rebuffed by Premier’s board. McCormick returned on 14 March with a 60p/share offer, and was spurned again, as reported.
Nissin then signed a conditional commercial agreement with Premier on 23 March and purchased a 17.3% stake in the company from private equity house Warburg Pincus on 24 March. Media reports indicated that Nissin had been notified of McCormick’s interest while Premier shareholders were left in the dark. Nissin purchased its stake for 63p/share.
McCormick returned on 30 March with a 65p/share offer, conditional on due diligence on the target’s pension liabilities, as reported.
Premier announced its tie-up with Nissin as a counter-measure to the McCormick bid, a Nissin spokesperson told this news service.
But the first and a second sector lawyer said the tie-up is not a frustrating action because Nissin purchased an existing stake from a third party. This should pass muster with the Takeover Panel, they said.
However, Nissin’s 17.3% stake could make a McCormick scheme of arrangement - which would require 75% shareholder approval - more difficult, depending on how Nissin eventually votes, the first lawyer noted.
Nissin’s interest could also prevent an eventual squeeze-out by McCormick, both lawyers added.
The commercial partnership between Premier and Nissin hinges on Premier no longer being in an offer period, the first lawyer said. Nissin’s involvement could have been seen as a frustrating action if it had been unconditional, but in its current form the conditional nature should raise no hackles with the Takeover Panel, he said.
As Nissin’s stake was purchased above the 60p/share bid on offer at the time from McCormick, and despite Nissin’s advance knowledge of McCormick’s approach, it is unlikely that there was any price effect in violation of the Code of Market Conduct, the first lawyer added.
Premier’s coldness to McCormick’s approach may be due to its board wanting to preserve company independence at any cost, a second source close to the situation suggested.
Premier stated that the latest offer continued to undervalue the company’s upside, but said it was open to talks, as reported.
The company is likely hoping both for more cash and for “clarity around conditionality”, the second source said.
A person briefed on the McCormick side defended the offer’s conditionality, saying it was only natural that the bidder should fully understand the pension liabilities in store.
Premier Foods and McCormick did not respond to requests for comment.
BXLT IR – 4/11 intended record date. Intention is for BAX to sell all of its remaining BXLT shareholdings (4.5% S/O) before May 26 (standstill agreement expiration date); this would also be the earliest date for BXLT to have its shareholder vote on the SHPG transaction.
BAX needs to wait 30 calendar days from the last offering (a secondary equity offering on March 16) before it can begin the exchange offer (which would be open for 20 business days). The IRS ruling for BXLT to be a the tax-free spin for BAX gave three options for disposing the BXLT shares: (1) sell the stock to reduce existing debt, (2) sell the stock to reduce existing pension obligations, and (3) an equity-for-equity exchange (which is similar to a share buyback).
BXLT still using mid-2016 closing guidance, which could be May, June or July. Regarding antitrust, there are no overlaps in the two companies products but would need to contact SHPG on an update of the outstanding approval processes (note: EC, Japan, Jersey, Russia, Taiwan & Turkey per the most recent proxy filed on March 28). BXLT and SHPG shareholder votes will be held close in time; BLXT filing a proxy and SHPG (Jersey incorporated, London primary exchange) filing a circular.
DISCLAIMER
This information represents neither an offer to buy or sell any security nor, because it does not take into account the differing needs of individual clients, investment advice. Those seeking investment advice specific to their financial profiles and goals should contact their Oscar Gruss & Son Incorporated sales representative. Oscar Gruss & Son Incorporated believes this information to be reliable, but no representation is made as to accuracy or completeness. This information does not analyze every material fact concerning a company, industry, or security. Oscar Gruss & Son Incorporated assumes that this information will be read in conjunction with other publicly available data. Matters discussed here are subject to change without notice. There can be no assurance that reliance on the information contained here will produce profitable results. A security denominated in a foreign currency is subject to fluctuations in currency exchange rates, which may have an adverse effect on the value of the security upon the conversion into local currency of dividends, interest, or sales proceeds. The value of securities and depositary receipts of foreign issuers that are denominated in United States dollars are also influenced by fluctuations in currency exchange rates.
© 2016 Oscar Gruss & Son Incorporated. All rights reserved.
RTRS - EURAZEO EURA.PA - EXCLUSIVE DISCUSSIONS TO PURCHASE MORE THAN TEN ICONIC EUROPEAN CHOCOLATE AND CONFECTIONERY BRANDS FROM MONDELEZ INTERNATIONAL
RTRS - EURAZEO EURA.PA - THIS MAINLY CONCERNS THE POULAIN, CARAMBAR, KREMA, LA PIE QUI CHANTE AND TERRY’S BRANDS, AS WELL AS THE PASTILLES VICHY, SUCHARD PRALINES AND MALABAR LICENSES
HOT/MAR – We were asked where we thought MAR would trade on no deal and where HOT would trade if the current Anbang deal proposal goes definitive.
MAR could trade back to 17x-18x P/E multiple of 2017E $4.40 EPS, an estimate which is basically unchanged since the deal was announced. HOT could trade at 6%-8% gross discount to Anbang price (not same CFIUS and antitrust issues of SYT, but still need financing and possibly a large term fee deposit for CFIUS, antitrust and deal financing).
Based on a $82.50/share cash price, that is $75.90-$77.50 (with the gross discount) plus 2 HOT dividends ($0.75 total) plus $6.00/share IILG value (0.4289 ratio and $14.10 trading price) for a grand total of $$82.65-$84.25/share.
With HOT trading at $83.50 and MAR deal worth $84.20 (but likely worth less if MAR trades back to high $60s), the market appears to be pricing in a potential small cash bump from MAR ($2-$3/share at best) for it to seal the deal (or at least the upcoming shareholder vote).
DISCLAIMER
This information represents neither an offer to buy or sell any security nor, because it does not take into account the differing needs of individual clients, investment advice. Those seeking investment advice specific to their financial profiles and goals should contact their Oscar Gruss & Son Incorporated sales representative. Oscar Gruss & Son Incorporated believes this information to be reliable, but no representation is made as to accuracy or completeness. This information does not analyze every material fact concerning a company, industry, or security. Oscar Gruss & Son Incorporated assumes that this information will be read in conjunction with other publicly available data. Matters discussed here are subject to change without notice. There can be no assurance that reliance on the information contained here will produce profitable results. A security denominated in a foreign currency is subject to fluctuations in currency exchange rates, which may have an adverse effect on the value of the security upon the conversion into local currency of dividends, interest, or sales proceeds. The value of securities and depositary receipts of foreign issuers that are denominated in United States dollars are also influenced by fluctuations in currency exchange rates.
© 2016 Oscar Gruss & Son Incorporated. All rights reserved.
Fed's Lockhart (moderate, non-voter): sees scope for three rate hikes this year - Japan press
Fed's Evans (dove, non-voter): inflation over 2% would be clear Fed would act to contain its rise
- expects March jobs data on Friday will show strength
- dot plot suggets a cohesive view for officals on rates
The principal driver of Moody's decision to change the outlook to negative from stable is the rising fiscal and economic challenges that the authorities face in achieving further fiscal consolidation. At the time that the structural reforms were adopted, Moody's expected that fiscal consolidation, coupled with much stronger real GDP growth (above 3%), would lead to a stabilization in the debt burden. However, a combination of the oil price shock and the slower than expected growth have undermined the economic outlook. Moody's forecasts only moderate growth of around 2.5% for 2016 and 2017, which will challenge the government's fiscal consolidation efforts.
Lower growth and a low oil price environment will reduce fiscal revenues. While fiscal reform has improved the structure of fiscal revenues, heightening resilience to oil price shocks by strengthening tax collection, Moody's forecasts that overall federal government revenues will decrease to 18.5% of GDP in 2016 from 19.3% in 2015. In response, the authorities have begun implementing expenditure measures to reduce the federal government deficit from 2.8% of GDP in 2015. Moody's forecasts a federal government deficit of 2.5% of GDP for 2016 and a gradual decline through 2018 when the deficit is likely to narrow to 2% of GDP.
Les dossiers Icade/Silic et Club Med/Fosun lui ont sûrement donné des idées : Michel Guillemot a formé un recours contre le visa de l'AMF à l'OPA de Vivendi. S'il obtient un sursis à exécution, l'opération pourrait être gelée
entre 6 mois et un an.
Les dossiers Icade/Silic et Club Med/Fosun lui ont sans doute donné des idées : dans le premier cas, l’OPA/OPE de la foncière de la CDC sur Silic a été retardée de près de deux ans en raison du recours formé devant la cour d’appel. Dans le second, c’est un retard d’environ un an qui a été constaté en raison, là encore, du recours formé contre les modalités de l’offre du chinois.
C’est donc manifestement avec la volonté de retarder l’opération, le temps sans doute, de trouver une parade à l’OPA inamicale lancée par Vivendi sur le capital de Gameloft, que Michel Guillemot, le patron et fondateur du groupe de jeux vidéo, a placé le dossier sur le terrain judiciaire en contestant le feu vert de l’AMF à l’offre publique. En formant ce recours, il a de bonnes chances, en effet, d’obtenir le sursis à exécution de l’opération jusqu’au prononcé de l’arrêt de la cour d’appel. Ce qui a presque toujours été le cas dans ce type de contexte, sauf dans
le dossier Société de la Tour Eiffel où l’actionnaire de référence, Chuc Hoang, avait formé un recours contre le projet d’OPA de SMA BTP mais n’avait pu obtenir de sursis à exécution.
L’éditeur de jeux vidéo pour mobiles invoque notamment "les manquements de Vivendi aux principes directeurs des offres publiques, ainsi qu'aux obligations légales et réglementaires visant à assurer la transparence et la bonne information du marché". A voir maintenant si ces motifs seront jugés sérieux ou abusifs et donneront lieu à un sursis à exécution