China hit the headlines again. Anbang, the little-known Chinese insurer in the middle of a USD 32 Bln spending spree, has launched a USD 13.1 Bln bid for Starwood Hotels. The company’s enigmatic chairman, Wu Xiaohui, is thought to enjoy strong connections within the Communist party elite, partly through his marriage to the granddaughter of Deng Xiaoping, the architect of modern China.
A broader concern about China’s acquisition spree stems from questions about why it is happening. Is it being driven by strength, or is it a reflection of the waning vigour of heavily indebted corporations in a slowing domestic market? To a significant degree, analysts say, the exodus of Chinese investment capital is in fact a “quest for cash flow”. Some of the big Chinese acquirers start by sdaying they are interested in buying anything — anything with a cash flow.
In residential real estate, Shanghai-based Greenland Group bought a majority stake in the Atlantic Yards development in Brooklyn NY, promising to help sell units to wealthy Chinese immigrants and investors. Part of the project has been renamed Pacific Park.
Dalian Wanda, owned by China’s richest man, Wang Jianlin, has similar plans for its projects in Madrid, Australia’s Gold Coast, Chicago and Beverly Hills in Los Angeles.
In other cases, the motivation is to acquire foreign technology. China’s leaders have long said that they want national champions to move up the value chain, especially in basic commodity industries suffering from overcapacity, which has cut profit margins to the bone. Many of these deals are too small to grab headlines.
Two years ago, state-owned China National Building Materials acquired Avancis, a German manufacturer of advanced materials used in solar panels. This year’s $43bn bid by ChemChina, a large state-owned enterprise, for Syngenta, the Swiss agribusiness, was driven mainly by the Swiss company’s biotechnology and agrochemcial prowess.
Alongside this thirst for technology and iconic western brands is the impressive speed with which some Chinese acquirers can act. Mr Wang of Dalian Wanda, which like Anbang is a private company that enjoys top-level official relationships, recently criticised the ponderous approach of his country’s state-owned enterprises.
