Bottom line: Anbang’s hiring of a consultant to gauge shareholder interest in its bid for Starwood indicates a lack of confidence in reaching a deal with Starwood’s management, and shows its offer is ultimately likely to fail.
Starwood preparing to reject Anbang?
Chinese insurer Anbang is quickly learning that money can’t buy you everything, following its surprise mega-bid for US hotel giant Starwood (NYSE: HOT), operator of the Sheraton and Westin brands. That’s my latest interpretation, following reports that Anbang has hired a professional proxy solicitor to gauge investor sentiment towards its $12.8 billion bid for Starwood that trumped a previous offer by US hotel giant Marriott (NYSE: MAR).
I said earlier this week that Starwood’s board and management were ultimately likely to reject the Anbang bid, and opt for a union with a partner like Marriott that could ensure its longer-term future. (previous post) This latest move implies that Anbang may be getting a cool reception from Starwood’s management, and is testing the waters to potentially take its bid directly to Starwood’s shareholders in what would become a hostile takeover bid. Read Full Post…
Bottom line: Midea’s reported bid for Toshiba’s home appliance business reflects a renewed global push by Chinese white goods maker, but is likely to fail due to Midea’s lack of experience managing a global brand.
Midea eyeing Toshiba’s white goods?
Leading appliance maker Haier (HKEx: 1169) could quickly discover it’s not the only Chinese company roaming the globe for acquisitions, with word that domestic rival Midea (Shenzhen: 000333) is in talks to buy the white goods business of Japan’s Toshiba (Tokyo: Tokyo). This particular news comes as Haier finalizes its purchase of the home appliance unit of General Electric (NYSE: GE), and is part of a larger push by big western companies to sell their lower-margin white goods businesses.
A subset of that bigger story has seen Japanese brands engage in their own campaign to sell off assets from their lower margin businesses, many of which are losing money. That trend has culminated in prolonged talks that are likely to see the struggling Sharp Corp (Tokyo: 6753) sell itself to Taiwan’s Hon Hai (Taipei: 2317), in what would mark the largest-ever sale of a Japanese electronics company to a foreign buyer. Read Full Post…
Bottom line: Starwood will ultimately reject a rival bid for itself by Chinese insurer Anbang, though earlier suitor Marriott may have to raise its original offer in order to close a deal.
Anbang makes counter bid for Starwood
China is shaping up as spoiler in the biggest US hotel merger of all time, with word that Chinese insurance company Anbang has made a surprise counter bid for Starwood (NYSE: HOT), operator of the Sheraton and Westin brands. The bid comes as the struggling Starwood was preparing to sell itself to larger and better-run US rival Marriott (NYSE: MAR), whose original offer is about 5 percent lower than Anbang’s. The latest twist also comes just a day after media reported that Anbang was in talks for another blockbuster deal to buy Strategic Hotels & Resorts, owner of a portfolio of US luxury hotels, in a deal valued at $6.5 billion.
I previously said that Anbang appears to be a company with too much cash, and would add that it doesn’t seem to have a very strong understanding of the hotel business. Put simply, Anbang seems to be suddenly smitten with any asset containing the word “hotel”, since Strategic and Starwood are very different types of companies. Whereas Strategic is largely a property owner, Starwood earns most of its money from managing hotels under its brands in buildings owned by other companies. Read Full Post…
Bottom line: Hertz’s sale of its Car Inc stake reflects the Chinese company’s new focus on hired car services, and could see Car Inc fall into the red as its UCar affiliate vies with Uber and Didi Kuaidi in the fiercely competitive market.
Hertz dumps Car Inc
A complex transaction involving Car Inc (HKEx: 699) is making the headlines as the new week begins, reflecting a transformation from its roots as a rental car specialist into a hired car services company competing with Uber and Didi Kuaidi. The deal will see former strategic stakeholder Hertz (NYSE: HTZ) sell most of its stake in the company to UCar, Car Inc’s hired car services affiliate. At the same time, Car Inc’s chairman and one of its largest shareholders will also sell his stake in the company to UCar, which will become one of Car Inc’s biggest shareholders.
There’s no explanation for the shuffle in the announcement, but it does seem to show that Car Inc’s Chairman Charles Lu wants to move his company more quickly into the hired car services sector, which is growing faster but is also fiercely competitive. That would explain Hertz’s decision to sell its stake, since Hertz is a global rental car company that probably has little interest in China’s ultra competitive hired car services market. Read Full Post…
Bottom line: Wanda Group founder Wang Jianlin and other major Chinese entrepreneurs intent on building wide-ranging conglomerates should look to the western failure of such firms instead focus on their core business areas.
Wanda’s Wang buys Carmike Cinemas
Billionaire deal maker Wang Jianlin was back in the acquisition headlines last week, when his increasingly diverse Wanda empire announced it would buy US-based Carmike Cinemas (Nasdaq: CKEC) as part of it its dream of building the world’s biggest theater chain operator. But theaters are just one of a growing number of items on Wanda’s recent list of mega-projects, which has also included plans for a multibillion-dollar European theme park, a major e-commerce venture, and investments related to sports and its core real estate products and services.
The sudden diversification looks similar to ones by other cash-rich Chinese companies, most notably e-commerce giant Alibaba(NYSE: BABA), and reflects a desire to move beyond their original businesses into new growth areas. While such a strategy seems logical, western experience has shown that such rapid diversification more often results in dysfunction rather than synergies, and frequently ends with the eventual break-up of such companies into smaller units focused on individual areas of expertise. Read Full Post…
Bottom line: IBM’s sale of its Lenovo shares isn’t surprising since it probably received the stock as part of a recent transaction between the pair, but still comes as the latest sign of no confidence in the struggling Chinese PC giant.
IBM dumps Lenovo shares
Things just keep getting worse for struggling PC maker and smartphone wannabe Lenovo (HKEx: 992). Just 2 weeks after new data showed the company’s smartphone sales plunged in its home China market at the end of last year, new reports are saying that US tech giant IBM (NYSE: IBM) is dumping the Lenovo shares that it received as part of a recent transaction between the pair of companies.
The amount of the sale doesn’t look that big, with IBM looking to sell about $150 million worth of Lenovo shares, the reports say. (English article; Chinese article) But it’s important to note those same shares were worth about twice as much in October 2014, which is when IBM probably first received the stock as part of a sale of its low-end server business to Lenovo for $2.1 billion. Read Full Post…
Bottom line: Alibaba’s latest $4 billion fund-raising could signal a potential deal to buy its shares currently held by Yahoo, as both companies look to remove a distracting issue that is affecting both of their stock prices.
Alibaba eyeing Yahoo stake?
Chinese e-commerce giant Alibaba (NYSE: BABA) just can’t seem to get enough money. Despite having more than $18 billion in its coffers at the end of last year and access to billions more in credit, the company is reportedly back in talks with a group of banks to raise another $4 billion. That raises the question of why exactly it needs all this money.
Alibaba has certainly been an aggressive acquirer over the last 2 years, spending billions on a wide range of companies in industries from entertainment, to hired car and social networking services and many others. Two weeks ago the company was in yet another major M&A headline, when it disclosed it had quietly purchased more than 5 percent of faded group buying giant Groupon (Nasdaq: GRPN) in the open market. (previous post) Read Full Post…
Bottom line: Turmoil in the Republican Party could claim a growing number of proposed Chinese acquisitions of US firms as victims, as Republican candidates turn to China bashing to curry voter favor before November elections.
Opposition grows over Terex sale to Zoomlion
Election year politics could soon claim their latest victim in M&A between the US and China, with 2 more congressmen expressing their concerns about Chinese construction equipment giant Zoomlion’s (HKEx: 1157; Shenzhen: 000157) talks to purchase US crane maker Terex (NYSE: TEX). This development doesn’t surprise me very much, especially since the latest 2 lawmakers to joint the anti-China movement are both Republicans seeking to curry favor with voters on this relatively simple issue as their own party sinks into chaos.
I don’t usually write in much detail about US politics, since the intricacies of elections aren’t that relevant to China trade. But in this particular election, growing chaos within the Republican Party could soon create anti-China rhetoric that’s louder than usual. That’s because many Americans could quickly become frustrated with the Republican Party’s infighting, which could hurt its candidates’ election prospects. That could leading many Republican candidates to try to win voter favor by rallying around the relatively safe concern about China’s growing global influence. Read Full Post…
Bottom line: Foreign investors will give China bank IPOs a cold shoulder for the rest of this year due to concerns of a bad debt crisis, potentially driving valuations even lower than their already depressed levels.
Zheshang Bank delays IPO plan
A couple of banking stories are spotlighting the rapidly fading attraction of Chinese lenders to foreign investors, who fear the banks are standing on the cusp of a bad loan crisis fueled by China’s cooling economy. The first item has Citigroup (NYSE: C) selling its 20 percent stake in China Guangfa Bank for $3 billion, after original plans to list the bank collapsed due to lack of investor interest. The second item has China Zheshang Bank also delaying plans for a $1 billion Hong Kong IPO for similar reasons.
Both developments come as Chinese banks listed in Hong Kong now trade at extremely low multiples due to concerns about their individual health and China’s broader economic slowdown. Leading lender ICBC (HKEx: 1398; Shanghai: 601398) now trades at a paltry price-to-earnings (PE) multiple of just 5, while Bank of China (HKEx: 3988; Shanghai: 601398) trades at an even lower 3.8. Read Full Post…
Bottom line: Apple would probably hand over iPhone user information to Beijing if faced with a situation like its current standoff with Washington, but would keep the matter low profile and possibly try to find other ways to placate Beijing.
Washington standoff spotlights Apple’s cooperation with Beijing
As the high-profile standoff between Apple (Nasdaq: AAPL) and Washington continues over access to information on a terrorist’s iPhone, a new report is raising the interesting question of what the US tech giant might do if faced with a similar situation in China. Actually, the “what if” scenario isn’t raised too much in the Los Angeles Times report, which instead focuses more on the cozier relationship that Apple has with Beijing in terms of allowing access to sensitive information related to its products.
But this still looks like a good opportunity to explore the “what if” angle, since Apple might find far fewer friends in China if it decided to defy a Beijing order to hand over information stored on the Chinese iPhone of a known terrorist. By comparison, the US technology giant has found at least some supporters for its refusal to help the FBI access information stored on the iPhone of Syed Rizwan Farook, the man behind the worst terrorist attack in the US since September 11. Read Full Post…
China’s growing love affair with Hollywood is reaching new peaks, with word that major studio Paramount Pictures may be preparing to sell a stake of itself to a Chinese buyer. Such a deal would be the highest profile investment yet in an ever-growing string of Chinese tie-ups with Tinseltown over the last 2 years. In some ways the movement looks strangely similar to Japan’s invasion of Hollywood more than 25 years ago, which saw Universal and Columbia Pictures sold to Japanese buyers.
That parallel may lead some to wonder if this latest Chinese drive into Hollywood could end with similarly disappointing results that saw both studios sputter under Japanese ownership. Prickly US-China relations could also add an element of discomfort to this new budding love affair, since Beijing enjoys a far less friendly relationship with Washington than Tokyo. Read Full Post…
