China's Voracious Appetite
Anyone paying attention to mergers and acquisitions knows China has emerged as a big player. But just how big?
For starters, of the world's four biggest deals in 2016, two involve Chinese buyers. ChemChina is buying Swiss pesticide maker Syngenta for $46 billion, and Beijing-based Anbang Insurance entered a bidding war with Marriott for Starwood, the U.S. owner of the Westin and W hotels. 1 Slowing economic growth at home and the possibility of further devaluation of the yuan has piqued Chinese buyers' interest in foreign targets -- especially in the U.S.
Even if China were to spend not one more cent on cross-border M&A this year, its buying binge would exceed the volume from previous years. As a result, Asia now accounts for a larger slice of the global pie, driving almost as much deal flow as North America, the leading acquiring region.
China has pursued U.S. hotels, movie theaters and semiconductor manufacturers of late. But over the past few years on a global basis, energy and commodities assets, as well as financial institutions, have received the biggest investment.
The nation's appetite appears to be growing ever larger. Syngenta is China's largest ex-Asia purchase so far. And of its 10 biggest outbound M&A bets, half have come this year.
China's increased presence in the global M&A picture is a game-changer, creating bidding wars where they weren't expected and driving up asset prices.
Many of China's biggest corporations are state-owned entities or have wealthy families behind them, giving them the firepower to go toe-to-toe with big North American and European suitors -- or assist smaller ones in consolidating their industries. For example, Chinese billionaire Wang Jianlin bought AMC Entertainment in 2012 and then took it public. AMC, still backed by Wang's Dalian Wanda Group, is now trying to buy Carmike Cinemas. This deal will leave Wang in control of the largest cinema operator in the U.S.
Anbang took Marriott by surprise when it launched an all-cash bid for Starwood this month -- after the two U.S. hotel companies had already agreed to merge and rival bidders were assumed to be out of the picture. Anbang's latest bid last week was deemed "superior." But on Monday, Starwood announced that it had agreed to a revised cash-and-stock offer from Marriott. It's not clear whether the investor group led by Anbang will try again or walk away.
Should U.S. regulators block a big takeover by a Chinese company, that could have a chilling effect on China-to-U.S. dealmaking. This hasn't been much of an issue yet, although China's Tsinghua Unisplendour did cancel a plan to make a large investment in Western Digital last month because it faced an investigation by the Committee on Foreign Investment in the U.S., or CFIUS, as the agency is known. It's very hard to predict which transactions CFIUS will scrutinize versus which ones will sail through without a review.
Still, as long as economic factors in China make overseas investments more compelling, Chinese firms are going to keep trying to shake things up. By all appearances, they're still hungry.
At the time of publication, Starwood said Anbang's offer was superior, so the data in the charts include the transaction.
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Beth Williams at firstname.lastname@example.org