New comments from China’s anti-monopoly regulator show it is preparing to play an increasingly active role on the global M&A stage, reflecting the nation’s growing importance as not only a major global manufacturer but increasingly also a consumer of many products. The comments from a top Commerce Ministry official, in this case regarding the pending acquisition of Hitachi’s (Tokyo: 6501) memory storage business by Western Digital (NYSE: WDC), look quite intelligent to me, showing that China is taking its new role quite seriously and that it could soon become a major gatekeeper for big global M&A deals, a job now mostly performed by the US and European Union. (English article; Chinese article) In this particular case, the head of the ministry’s anti-monopoly bureau, Shang Ming, made suitably cautious comments at a year end event in Beijing by saying his department is concerned the deal could harm competition in the global market for hard disc drives “to a certain extent”. With this kind of comment, Shang is indicating his department is likely to approve the deal, but only after Western Digital and Hitachi take steps to ensure the global market for disc drives remains competitive, most likely by selling off some assets to another rival. Such conditions are relatively common in global M&A, and are frequently imposed by the US and European regulators before they approve many major global deals. In fact, China has previously imposed such conditions on other major global M&A in its brief history of regulating such deals, though in the few such cases to date conditions have been relatively mild. These latest comments indicate that could change in the future as China looks to play a bigger role in global markets. All this looks good if the Commerce Ministry continues to develop itself as a fair judge dedicated to free trade. It showed movement in that direction last month, when it approved the purchase of leading hot pot chain Little Sheep by Yum Brands (NYSE: YUM), operator of the KFC chain, casting aside concerns by some that the deal might be vetoed for more nationalistic reasons. Global companies will undoubtedly be watching carefully for the final decision in this Western Digital deal; but final conditions that are reasonable and fair will give more credibility to China as it seeks to establish itself as a serious player in regulating the flow of major global M&A.
Bottom line: China’s careful approach to Western Digital’s pending purchase of Hitachi’s hard disc drive business reflects its growing maturity as an arbiter of major global M&A.
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I don’t usually like to congratulate myself for making correct predictions, but in this case it does seem my mid-year forecast of a major new round of fund-raising by Chinese banks may soon occur in the new year as many look to repair their stressed-out balance sheets. I made my prediction back in July when China Merchants Bank (HKEx: 3968; Shanghai: 600036), one of the nation’s top regional players, announced plans to raise up to $5.4 billion — its second major capital raising after it and most of the country’s top banks raised hundreds of billions of dollars in 2009. (
Two separate news bits out today show that Asian firms, in this case leading brokerage CITIC Securities (HKEx: 6030; Shanghai: 600030) and 3 Korean TV program makers, may pose an interesting challenge to Western names in lucrative developing new business areas in now taking shape in China. In the first of those bits, CITIC Securities announced it has just received regulatory approval to become a renminbi qualified foreign institutional investor (RQFII), a new program that allows financial services firms to raise Chinese yuan outside the country for re-investment in China stocks and other financial products. (
There’s an interesting report in the media space that the Xinhua News Agency plans to publicly list its news web site — a development with hugely symbolic overtones that could foreshadow a long-awaited liberalization in this highly sensitive sector and portend a major new round of IPOs for big media firms. Foreign media are citing unnamed sources saying that Xinhua is planning a domestic listing for its news portal, Xinhuanet, in a deal that would see it raise around 1 billion yuan, or more than $150 million. (
Sina (Nasdaq: SINA), China’s leading web portal whose shares have been battered lately, has received a rare piece of good news in the form of a potential major new investment for its controversial Twitter-like Weibo service from heavy-hitter Digital Sky Technologies (DST). (
You know your industry is starting to mature when a big player like Hon Hai (Taipei: 2317), the massive Taiwanese electronics maker of everything from PCs to iPhones, steps in to the picture, a move that should come as both a relief but also a worrisome development for the troubled solar cell sector. Foreign media are reporting that Hon Hai unit Foxconn Technology (Taipei: 2354) is building a massive new solar cell plant in China’s Jiangsu province, adding a major player to a sector already struggling with large overcapacity that has caused prices to tumble by more than 60 percent this year alone and driven nearly every company into the red as their stocks hover near all-time lows. (
A recent series of Chinese acquisitions in the global mining space have touched off a mini-gold rush among foreign firms looking to cash in on the action through various tie-ups, including 2 new deals announced this week, one in the mining equipment sector and the other in gold exploration. All this comes as Yanzhou Coal (Shanghai: 600188; HKEx: 1171; NYSE: YZC) one of China’s top miners, has just sealed a deal to buy Australia’s Gloucester Coal for more than $2 billion (
I normally don’t like to write about the same deal twice in one week, but in this case things suddenly seem to be moving quickly in the story of faded Internet giant Yahoo (Nasdaq: YHOO), which may soon dispose of some or all of its 40 percent stake in Chinese e-commerce leader Alibaba as well as its holdings in Yahoo Japan (Tokyo: 4689). Reports in the foreign media are slightly conflicting, but what’s clear is that the Yahoo board was set to meet on Thursday to discuss a plan that would see it sell either 25 percent of its stake in Alibaba, or perhaps the entire 40 percent stake, under a deal that would be worth around $17 billion. (
I’ll finish my postings on this Winter Solstice day with a few tidbits from the retail sector, which offer some interesting glimpses into the potential power of e-commerce to help Chinese firms expand both at home and abroad. The biggest of these news bits comes from Dangdang (NYSE: DANG), China’s only listed major e-commerce firm, which is launching an electronic book service to complement its industry-leading online book store. (
There are a couple of big new developments in the solar space, one from India that bodes poorly for China’s embattled sector, while the other coming the US seems like a diversion that won’t have much impact on an ongoing anti-dumping investigation. All of these developments have the catch phrase “anti-dumping” in common, indicating that perhaps China should wake up to the fact that it probably does provide generous subsidies to its solar cell makers, hurting competitors in other markets, and should take steps to end the practice rather than constantly denying the allegations. In the latest developments in this increasingly global war of words, India has joined the US and Europe by opening its own probe into unfair subsidies by Beijing for its increasingly embattled field of solar cell makers, which have rapidly risen in the last 5 years to now supply over half the world’s output. (
