Bottom line: Taiwan should quickly approve Tsinghua Unigroup’s plan to buy a quarter of Taiwan’s Powertech for $600 million if it finds no security issues, which could help to accelerate cross-Strait high-tech M&A deals.
Unigroup, Powertech in cross-Strait microchip tie-up
One of the biggest equity tie-ups to date between high-tech companies across the Taiwan Strait was announced late last week, when the acquisitive Tsinghua Unigroup said it planned to buy a quarter of Taiwanese chip company Powertech (Taipei: 6239) for around $600 million. The deal would provide Unigroup with valuable production assets in its drive to build a major new global chip maker, and would give Powertech cash and other resources as it fights for advantage in the highly competitive chip sector.
And yet despite the obvious rationale for such a deal, only a handful of similar tie-ups have occurred to date due to the risks of getting vetoed by Taiwan on national security grounds, since they involve sophisticated technology. Read Full Post…
The following press releases and media reports about Chinese companies were carried on November 3. To view a full article or story, click on the link next to the headline.
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Tencent (HKEx: 700) Plans $1 Bln Investment in New Meituan-Dianping (English article)
HSBC (HKEx: 5) Targets Chinese Bond Market with Securities JV (English article)
Gaming Firm Giant Interactive to Backdoor List Through New Century Cruise (English article)
Ming Yang (NYSE: MY) Announces Receipt of “Going Private” Proposal (PRNewswire)
Baixing.com Submits Filings, Aims for Year-End IPO on China’s OTC Board (Chinese article)
Bottom line: The arrest of a leading private equity executive for insider trading and Jin Jiang’s new fund-raising represent the latest efforts to clean up China’s unruly stock markets and make them more attractive to international investors.
Private equity giant detained for insider trading
I don’t normally write too much about China’s domestic stock markets due to their chaotic nature, but a couple of news items are shining a spotlight on the ongoing major task of cleaning up these unruly venues as they try to become more international. The larger of the 2 stories is making big waves here in China, where the one of the nation’s best-known private equity chiefs has been detained for insider trading. The second item has recently acquisitive hotel operator Jin Jiang (HKEx: 2006; Shanghai: 600574) preparing for a major new fund raising, as it tries to clean up its own financial house in a bid to become China’s first global hotel operator.
Each of these items is quite different, though both are focused on different aspects of cleaning up a domestic stock market that often seems more like the Wild West than a place for serious investors. Share price manipulation is common practice in the market, which is reflected in the insider trading story. The Jin Jiang story reflects the murky relationships that often exist between listed companies and government entities, making it nearly impossible for serious investors to clearly understand a company’s financial health. Read Full Post…
Bottom line: VMWare’s new China joint venture is the latest such tie-up for a major western tech firm to ease Beijing’s national security concerns, and could prompt the US to implement tougher restrictions on technology transfers to China.
VMWare in China cloud joint venture
EMC (NYSE: EMC) and its acquirer Dell are jumping on a high-tech train that goes directly to Beijing, with word that EMC-controlled VMWare (NYSE: VMW) has become the latest IT firm to set up a joint venture with a Chinese partner. The trio of high-tech giants join a growing number of other leading US tech firms to form similar ventures, with Hewlett Packard (NYSE: HPQ), IBM (NYSE: IBM) and Cisco (Nasdaq: CSCO) all forming similar tie-ups over the past year.
The rush to form such alliances comes as China rolls out a new national security law that could otherwise limit the big multinationals’ ability to sell their products and services to the Chinese government and big state-owned enterprises. But at the same time, a new New York Times report is pointing out that many of the Chinese firms in these new tie-ups also have links to China’s defense establishment, potentially setting the stage for a showdown between Washington and Beijing over national security. Read Full Post…
Bottom line: Baidu’s new upscale online shopping mall looks more focused and well designed than its earlier e-commerce initiatives, but could have a difficult time finding an audience due to stiff competition.
Baidu tries e-commerce again with upscale mall
Online search leader Baidu(Nasdaq: BIDU) is hoping the third time is the charm for its drive into e-commerce, with the formal launch of its new online mall with a distinctly foreign flavor targeting high-end shoppers. I’ve followed Baidu for a long time now, and the company certainly has a poor track record in e-commerce and more broadly for homegrown initiatives like this latest one called Baidu Mall.
But that said, the company has found more success recently by buying assets outside its core online search area, and then giving them access to its own vast cash and other resources to help them quickly gain market share. Perhaps it’s hoping to use that strategy as well for the newly launched Baidu Mall, even though the platform itself seems to be Baidu’s own creation rather than an acquisition. Read Full Post…
The following press releases and media reports about Chinese companies were carried on October 31-November 2. To view a full article or story, click on the link next to the headline.
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Jin Jiang (HKEx: 2006) Prepares to Raise 4.5 Bln Yuan to Improve Capital Structure (Chinese article)
Tsinghua Unigroup to Take 25 Pct in Taiwan’s Powertech (Taipei: 6239) for $600 Mln (English article)
VMWare (NYSE: VMW), Sugon (Shanghai: 603019) Form China JV (Chinese article)
Bright Food Said to Prepare IPO of $1 Bln Manassen Foods Distribution Arm (English article)
LeTV (Shenzhen: 300104) CEO Sells 100 Mln Shares, Lends Proceeds to Company (Chinese article)
Bottom line: An aggressive new share buy-back and tie-up between its Qunar unit and former rival Ctrip could indicate a new pragmatism from Baidu chief Robin Li, signaling a potential new era of more realistic spending on its emerging businesses.
Baidu jumps on mixed report
Investors hoping for new signs of restrained spending in the latest results from Baidu (Nasdaq: BIDU) were disappointed, as China’s leading search engine continued a recent spending frenzy that has sharply eroded profits. But that didn’t stop those same investors from bidding up Baidu’s shares after release of its third-quarter results, leading me to believe they’re hoping the spending frenzy may soon start to subside. We saw some signs that may be happening earlier this week, following a landmark tie-up between Baidu’s Qunar (Nasdaq: QUNR) online travel site and former archrival Ctrip (Nasdaq: CTRP).
Despite its frenetic expansion outside its core search business over the last year, Baidu remains largely a one-trick pony, deriving most of its revenue from its core online search business. It has found some success in some newer areas, such as online video, travel services and group buying. But the reality is that those businesses are still quite small in terms of revenue contribution, and all are losing big money as Baidu allows them to spend heavily in pursuit of market share. Read Full Post…
Bottom line: New financing deals for Canadian Solar and Trina reflect the growing role of solar panel makers as power plant builders, and could provide some stability to the sector by providing a more reliable stream of new projects.
Trina, Canadian Solar get new financing
Two big new financing deals are shining a spotlight on a major shift taking place in the solar panel sector, with manufacturers increasingly moving into the field of solar farm development. The shift is seeing solar panel makers become their own best customers, buying up panels for use in solar farms that they build themselves. The latest headlines have Canadian Solar (Nasdaq: CSIQ) and Trina (NYSE: TSL) securing major new financing for such construction, in 2 deals that are both quite large but also very different in nature.
Solar panel makers have been building their own plants for several years now, though the trend has accelerated in the last year. The traditional model was for them to build solar farms using their own panels, and then sell those plants to longer-term buyers. But in an interesting twist to that story, solar panel makers may be looking to hold those farms themselves and put them into separate units, my sources say. Those units could then be spun off later into separate publicly listed companies, in a play that would look like a new energy version of traditional power utilities. Read Full Post…
The following press releases and media reports about Chinese companies were carried on October 30. To view a full article or story, click on the link next to the headline.
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Bottom line: SouFun should be commended for its proactive and open approach to a recent crackdown on internal corruption, which could provide some potential upside to its shares after negative publicity subsides.
SouFun clamps down on corruption
Real estate services provider SouFun (NYSE: SFUN) has become the latest Chinese Internet firm to join a national anti-corruption campaign, with its issue of a slightly cryptic statement that looks related to a scandal that rocked the company earlier this month. That scandal saw media report that SouFun had fired a number of salespeople over vague allegations of inflating their business. (previous post)
More than 2 weeks after those reports broke, SouFun has just issued a statement outlining a recent internal probe that netted an unspecified number of employees who were engaged in corrupt practices. I have to commend SouFun for taking the action and also being relatively open about what it’s doing, even though this particular statement isn’t extremely clear and was almost certainly prompted by the earlier reports. Read Full Post…
Bottom line: A Shandong company’s purchase of nearly half of an Australian beef producer is the latest in a string of offshore meat acquisitions by Chinese firms, many of which could ultimately fail due to cultural differences.
Delisi buys 45 pct of Australian beef firm
Foreign meat companies have become the flavor of the day for acquisitive Chinese buyers, with word that a company called Delisi has just purchased 45 percent of Australian beef company Bindaree. The deal would come just weeks after leading Shanghai food group Bright Food paid a similar price for half of a New Zealand meat company, and a couple of years after the blockbuster purchase of leading US pork products maker Smithfield by WH Group (HKEx: 288).
Media are saying that a recent free trade agreement (FTA) between Australia and China may have helped to facilitate this latest deal between Delisi and Bindaree, and perhaps that’s partly true. But the reality is that China’s fast-growing economy is fueling a strong domestic appetite for meat. China’s own inefficient production also often means that locally produced meat is lower quality and more expensive than comparable products made overseas, which explains why these new offshore tie-ups are quite attractive. Read Full Post…
