News Digest: December 21, 2011

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The following press releases and media reports about Chinese companies were carried on December 21. To view a full article or story, click on the link next to the headline.

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◙ Ping An Insurance (HKEx: 2318) to Sell Up to 26 Billion Yuan of Convertibles (English article)

◙ China Telcos Announce November 2011 Subscriber Totals (English article)

◙ Xiaomi Lands USD 90 Mln in New Funding (English article)

◙ Canadian Solar (Nasdaq: CSIQ), TransCanada Corp In Deal For 86MW Solar Project in Ontario (PRNewswire)

◙ Mindray Medical (NYSE: MR) to Acquire a Controlling Stake in Hunan Changsha TDR Biotech (PRNewswire)

China: A Fickle Global Shopper 中国企业缺乏并购经验

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Three recent global M&A deals by Chinese firms outside the resource sector are highlighting the country’s potential as a major new player for such deals, but also its unreliability, as only 2 of the 3 deals ultimately collapsed. This ratio of 2 failed deals for every successful one could well indicate what we will see from China over the next 2-3 years, as many deals collapse for a wide number of reasons, from lack of financing to disapproval by Beijing, or even changes of heart by fickle acquirers. In the most high-profile of the 3 recent deals, a months-long effort by 2 obscure firms to buy a controlling stake in Saab has finally collapsed, with the dying Swedish automaker officially filing for bankruptcy. (English article) The deal, which would have seen Pangda Automobile (Shanghai: 601258) and Youngman Lotus take their stake in exchange for a big cash infusion, looked desperate from the start, and I predicted it was doomed to collapse due to lack of experience by the 2 companies and disapproval from Beijing. (previous post) The other 2 deals involve HNA Group, the investment arm of the Hainan provincial government, which is shaping up as a relatively savvy player as it embarks on a global M&A drive using its cash pot of more than $6 billion. (previous post) In one of those deals, the company just completed its $1 billion purchase of GESeaCo, the container leasing arm of General Electric (NYSE: GE). (English article) HNA made the bid together with a non-Chinese firm, Bravia Capital, which may have played a key role in the successful completion. HNA’s other recent deal wasn’t so successful, with the company citing financial market turbulence behind its decision to suddenly abandon a previous pledge to buy 20 percent of Spanish hotelier NH Hoteles (Spain: NHH). (English article) My only observation in this case is that HNA should have considered that factor much earlier in the process rather than waiting until the last minute, a decision that caused NH Hoteles shares to plummet 30 percent since the decision. All this goes to show that Chinese firms may have plenty of cash and want to do more major global M&A, but that they will be highly unreliable buyers for the next few years due to inexperience — a factor that many foreign sellers need to consider before starting any negotiations.

Bottom line: A recent string of 3 major global M&A deals by Chinese firms, 2 of which failed, show these firms want to become major players but will stumble frequently due to inexperience.

Related postings 相关文章:

◙ More Stumbles for Saab Rescue, 360Buy IPO 搭救萨博和京东商城IPO两计划注定命运多舛

◙ HNA: China’s Next Big Global Investor? 海航集团：中国下一个大型全球投资者？

◙ Message to Saab: Don’t Count on China 萨博不应指望中国注资

Cash-Rich China Eyes More Global Energy Assets　　财大气粗的中国企业着眼更多全球资源并购

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There are a few interesting items out today on the energy sector, spotlighting two recent trends that have seen China become a major player on the global M&A stage, while its energy majors also suffer from growing exposure to liability industrial from accidents. In the first category, Yanzhou Coal (HKEx: 1171; Shanghai: 600188; NYSE: YZC) and Sinopec (HKEx: 386; NYSE: SNP) are reportedly exploring major new deals in Australia and Spain; while in the second category oil producer CNOOC (HKEx: 883; NYSE: CEO), already embroiled in an environmental mess off the northeast China coast, is reporting more similar woes at one of its southern China operations. Let’s look at the latest M&A deals first, which are seeing Yanzhou make a $2 billion bid for Gloucester Coal (Sydney: GCLAX) (English article), while Sinopec is reportedly eyeing a 2.7 billion euro bid for 10 percent of Spanish oil major Respol, part of a bigger stake held by indebted Spanish developer Sacyr Vallehermoso. (English article) What both of these deals have in common is that the assets are being sold by owners under financial pressure to raise funds, a factor that will play to the advantage of Chinese firms that are not only cash rich, but also have easy access to credit due to Beijing’s desire to become more energy self sufficient. That combination of tight credit outside China and Beijing’s desire buy global assets should help to make 2012 a big year for Chinese acquisitions of global resource assets, especially as cash-strapped global companies look to sell such assets to raise quick funds. (previous post) Meantime, CNOOC has issued a press release saying one of its gas units in the southern city of Zhuhai near Macau has discovered a leak in one of its nearby offshore subsea gas pipelines. (company announcement) Following the discovery, CNOOC was forced to shutdown production of some wells, and, equally important, is incurring extra costs from emergency measures it is taking to avoid pollution, explosions and other accidents. This latest setback comes as the company faces billions of dollars in liability related to oil leaks at an oil field it is developing off the northeast China coast with ConocoPhillips (NYSE: COP). The accidents spotlight the growing risk that CNOOC, Sinopec and other energy firms are facing as they expand both inside and outside China, and as Beijing puts growing importance on workplace safety and environmental protection.

Bottom line: New developments indicate 2012 will be a big year for global M&A by China energy firms, which will also face growing risk from industrial accidents.

Related postings 相关文章:

◙ 2012: The Year of China Resource M&A? 2012：中国企业的资源并购年？

◙ Sinopec Latest Victim of Environmental Scrutiny 中石化管道工程因环保计划不足被叫停

◙ Yanzhou’s War Chest Gets Fatter on New M&A Model 兖州煤业将为中国同行树立榜样

Microblog Clampdown: Only Chapter 1? 实名制向网络行业吹去冷风

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A new rule requiring microbloggers to register using their real names continues to send chills through the online world, with a new report saying the campaign will soon be extended to other social media. The domestic media reports cite an unnamed government official in Beijing, which announced the initial rule late last week (previous post), saying more guidelines will follow requiring all sites to implement real-name registration throughout their various social networking sites to give operators like Sina (Nasdaq: SINA), Tencent (HKEx: 700) and Renren (NYSE: REN) quick and easy access to who is doing what and pass that information to government officials upon request. (English article) If China was looking to kill or severely stifle development of its fledgling but vibrant social media, this certainly looks like a good way to do it. The initial rule appeared to target microblogging sites, which would have dealt a blow to a limited number of companies, most notably Sina’s popular Weibo service. But this new expanded rule would potentially affect any and every kind of social media service, from microblogging to social networking services (SNS) operated by Renren and Kaixin and even instant messaging services like Tencent’s popular QQ. The traditional SNS services may be best positioned to weather this storm, as most encourage their users to register using their real names, whereas the big majority of microblogging and instant messaging users use Internet names that are often difficult or impossible to trace. But regardless of any of that, this expanded requirement will send a strong signal that anything and everything a person writes in any of these sites is being monitored by the government, discouraging many from using the services at all. In some ways, this latest crackdown looks similar to one 5 or 6 years ago on the then-vibrant text messaging services industry, a mainstay of Sina, Sohu and NetEase (Nasdaq: NTES) at that time. That crackdown effectively killed the industry in the years that followed. I doubt results of this crackdown will be as severe, but I would still look for activity on these social media sites to slow and even drop off sharply in the next year.

Bottom line: Beijing’s potential expansion of its real-name policy to all social media will send a chill through the industry and severely hamper its development.

Related postings 相关文章:

◙ New Rule Hits Sina, Instant Messaging to Benefit? 微博实名重创新浪 即时信息服务有望受益

◙ Govt’s Microblog Shift Looks Good for Weibo 政府口风转变或有利於新浪微博

◙ Weibo Still Faces Crackdown Despite Govt Tie-Up 新浪微博难改“被监管”命运

News Digest: December 20, 2011

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The following press releases and media reports about Chinese companies were carried on December 20. To view a full article or story, click on the link next to the headline.

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◙ Yanzhou Coal (HKEx: 1171) Is Said to Plan $2 Billion Purchase of Australia’s Gloucester (English article)

◙ Beijing to Extend Real Name Beyond Microblogs – Source (English article)

◙ CNOOC (HKEx: 883) Unit Finds A Leakage In Zhuhai Terminal’s Subsea Pipeline (PRNewswire)

◙ China Unicom (HKEx: 762) Announces Operational Statistics for November (HK Stock Exchange)

◙ Saab Automobile Submits Filing for Bankruptcy (English article)

土豆和优酷：中国打击盗版的民间警察

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中国两大视频分享网站——土豆网<TUDO.O>和优酷网<YOKU.N>发生了一场有趣的口角。中国第二大视频分享网站土豆指控优酷侵犯其版权，而优酷也以类似指控回击。从钱的角度来看，这一系列举动没多大意思，但从另一个角度来看就有意思多了。中国政府数年来一直努力遏制盗版问题，土豆和优酷的举动，显示中国私营部门可能最终介入，并成为在版权保护上比政府更为有效的警察。让我们先来看看这则新闻，土豆向监管部门指控，土豆网拥有台湾流行综艺节目《康熙来了》在大陆的独家授权，而优酷盗播了此节目，且一再忽视其要求撤下该节目的请求。优酷回应称，土豆盗播优酷60余部热播电视剧。除了向监管部门投诉外，双方均表示将采取法律行动。当然，多数人都知道，将此类纠纷诉诸中国法庭可谓费时费力，因这场官司或将旷日持久，而最终惩罚力度通常小到几乎没有威慑效应。也就是说，有意思的地方在於，土豆和优酷很可能成为中国亟需的打击盗版的民间警察。例如，那些依靠盗版电影和电视节目来增加网站流量的较小互联网企业，日後或许会三思而後行，因他们担心，优酷、土豆、搜狐<SOHU.O>等业界老大可能采取针对他们的法律行动，或向监管当局投诉，监管当局有权将这些较小企业关闭。所有这些，都只会有利於视频制作公司本身，像好莱坞影视公司以及华谊兄弟<300027.SZ>等国内影视企业。这不仅能让他们在中国赚取更多利润，且能使其将重心更多放在对中国的发行上，而将打击盗版的事留给那些也深受盗版侵权所害的民间企业。

一句话：中国两大视频分享网站的纠纷，显示此类网站很可能成为帮助中国打击视频盗版的强力民间力量。

相关文章:

◙ 搜狐发喜报视频业务或上市

◙ 视频制作商或迎来美好时代

◙ 吉视传媒加入中国媒体低调上市大军

Tudou, Youku: China’s New Piracy Police　　土豆和优酷：中国打击盗版的民间警察

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An entertaining tiff has broken out between China’s top 2 video sharing sites, with Tudou (Nasdaq: TUDO), the country’s second largest player, accusing top player Youku (NYSE: YOKU) of copyright violations, prompting Youku to counter with its own similar allegations. (Tudou lawsuit article; Youku lawsuit article) The series of actions are interesting less from a monetary perspective, but more because they show that China’s private sector may finally step in and become a much more effective policeman for protection of copyrights than Beijing has been, despite years of effort by the government to curb the problem. Let’s look at the actual news first, which saw Tudou complain to regulators that Youku ignored its repeated requests to take down episodes of a popular Taiwanese TV talk show that Tudou said it held the exclusive mainland Chinese rights for. Youku responded with its own accusations that Tudou was showing more than 60 TV programs which Youku holds the rights to. In addition to complaining to authorities, both companies are threatening legal action against each other. Of course, most people know China’s courts have proven an ineffectual avenue for resolving this kind of dispute, as decisions can take months or longer, and penalties are usually so small that they provide little or no deterrent effect. That said, the interesting thing here is that Youku and Tudou, as the industry’s top 2 players with big resources at their disposal, could potentially emerge as the kind of private sector policemen that China sorely needs to clamp down on piracy. For example, smaller Web firms that depend on trading of pirated movies and TV shows to bring traffic to their sites, might think twice if they are worried that big names like Youku, Tudou and Sohu (Nasdaq: SOHU) might take legal action against them or complain to regulators who have the power to shut them down. All of this can only be good news for the program makers themselves, like the big Hollywood studios and domestic names like Huayi Brothers (Shenzhen: 300027), which will be able to not only make bigger profits in China, but also be able to focus more on building their China distribution while leaving the business of clamping down on piracy to private sector players who also get hurt by copyright violators.

Bottom line: A spat between China’s top 2 video sites shows that such sites could emerge as a powerful private sector force to help stamp out video piracy in the country.

Related postings 相关文章:

◙ Sohu’s Blowout Earnings: IPO In Store for Video? 搜狐发喜报视频业务或上市

◙ Video Makers On Cusp of Renaissance 视频制作商或迎来美好时代

◙ Jishi the Latest in Low-Key Media Listing Parade 吉视传媒加入中国媒体低调上市大军

New Loan Brings Alibaba Value Into Focus

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New figures coming out of a foreign media report are starting to shed some light on the value Alibaba, China’s biggest e-commerce group, as it moves forward with a deal that would see it lead a group to buy out faded Internet giant Yahoo (Nasdaq: YHOO) and then personally buy back the 40 percent of itself that Yahoo current holds. The interesting element to all this is that based on the latest numbers, Alibaba’s valuation is likely to come in around $20 billion, not bad for a company whose only listed unit, B2B specialist Alibaba.com (HKEx: 1688) is only worth about $5 billion, but also a far cry from the $32 billion that some would like others to believe. According to the latest report, Alibaba is close to assembling a $4 billion loan that it would use to buy back the 40 percent of itself held by Yahoo after the bigger Yahoo buyout, which itself would be valued at around $25 billion. (English article) We already know from public data that Yahoo’s other big Asia asset, its 35 percent stake in Yahoo Japan (Tokyo: 4689), is worth about $6 billion at current market rates. That means $19 billion of the $25 billion purchase price would cover Yahoo itself and the 40 percent of Alibaba that it owns. We also know that Alibaba is raising $4 billion in bank loans to buy out the 40 percent of itself owned by Yahoo, which presumably represents perhaps about half of the financing for the deal. So that would mean Alibaba may pay about $8 billion for the 40 percent stake in the end, valuing itself at about $20 billion and the rest of Yahoo at about $11 billion. I know that may look like a lot of math, but at the end of the day we’re looking at 3 big pieces: A new Yahoo worth about $11 billion, an Alibaba worth about $20 billion and a Yahoo Japan which we already know is worth $18 billion. The Alibaba figure is the most interesting to me, as one of the company’s newest investors previously said the price his company paid for a stake in Alibaba this summer valued the group at $32 billion (previous post) I said that figure looked quite inflated and was indicative of China’s looming Internet bubble, which is already showing signs of bursting. Alibaba certainly realizes all this, which is why it is working hard to quickly close this deal and maintain a respectable valuation in the $20 billion range before the bubble really bursts.

Bottom line: The latest figures on a pending deal to buyout Yahoo show Alibaba is worth about $20 billion, a respectable sum but still well below a figure floated in the market earlier this year.

Related postings 相关文章:

◙ Alibaba Scrambles to Prove High Valuation 阿里巴巴高估值或将作茧自缚

◙ Alibaba Tests Waters for Yahoo Buyout – Again 阿里巴巴再试水竞购雅虎股权

◙ Alibaba’s Incredible Shrinking Profit Growth 阿里巴巴盈利呈加速放缓趋势

New Rule Hits Sina, Instant Messaging to Benefit? 微博实名重创新浪 即时信息服务有望受益

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The Internet world has been buzzing over the weekend about a new rule announced by the Beijing municipal government late last week requiring all microbloggers to use their real names. First off, I should applaud regulators for at least flagging this issue before making the actual move, as a high-ranking official said back in October that such a rule was being considered. (previous post) But that said, the new rule itself has left lots of people scratching their heads over what it all means. Clearly the big loser is Sina’s (Nasdaq: SINA) Weibo service, which stands to lose many of its more than 200 million users when the new rule is fully implemented. At least a few of my friends say they won’t keep using Weibo if they have to register with their real names, and I wouldn’t be surprised to see the service lose up to half of its active users by the time things settled down. Sina, which is already struggling after taking massive write-downs for its real estate and e-commerce investments (previous post), said it is still studying the new rules to figure out their impact. (company announcement) The news marks a major setback for Weibo, often called the Chinese equivalent of Twitter, which Sina was in the process of trying to monetize though progress was slow. This new rule may make Sina think twice about putting too much emphasis on Weibo, potentially killing plans for a separate IPO for this formerly promising business. In the meantime, one of my sources tells me the move by the Beijing city government is likely to be followed by other cities, meaning rival services from companies like NetEase (Nasdaq: NTES) will also be affected, though the impact should be limited since most of those have far fewer users than Weibo. What’s far less clear is how, if at all, instant messaging services, which have many microblogging-type characteristics, will be affected. I wrote about one of those in the mobile space last week, the Weixin service being developed by Tencent (HKEx: 700) (previous post), and many other companies are developing similar services, especially for use on mobile phones. I suspect these instant messaging services will escape regulation for now under this new rule, and could  even potentially benefit when droves of microbloggers start to defect from Weibo and other services in the months ahead.

Bottom line: Sina’s Weibo is the clear loser in Beijing’s new campaign to clamp down on microblogging, while instant messaging firms like Tencent could emerge as possible beneficiaries.

Related postings 相关文章:

◙ Watch Out Weibo, Weixin Is Growing 新浪微博要小心腾讯微信要崛起

◙ Govt’s Microblog Shift Looks Good for Weibo 政府口风转变或有利於新浪微博

◙ Sina Results: Not So Diversified After All 新浪仍依赖广告,突围遇阻

News Digest: December 17-19, 2011

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The following press releases and media reports about Chinese companies were carried on December 17-19. To view a full article or story, click on the link next to the headline.

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◙ Sina (Nasdaq: SINA) Announces New Rules on Microblogging by Beijing Municipal Government (PRNewswire)

◙ Alibaba’s $4 Billion Loan Takes Shape (English article)

◙ Spreadtrum Communications (Nasdaq: SPRD) Announces Share Repurchase Program (PRNewswire)

◙ Youku (NYSE: YOKU), Tudou (Nasdaq: TUDO) Trade Copyright Infringement Allegations (English article)

◙ HNA Group Completes $1.05 Billion Purchase of GE Container-Leasing Venture　（English article)

Sinopec Balks at Rebuff to Hostile M&A Bid 中石化试水敌意收购碰壁

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I’ve been watching with interest this week as the acquisition-hungry Sinopec (HKEx: 386; NYSE: SNP) made what many are saying was the first major attempt at hostile M&A by a Chinese company, only to become flustered when it was rebuffed. The rapid development of events shows that major Chinese companies are still neophytes in hostile takeovers, though this case would also indicate that they want to try more of this difficult form of deal making going forward as they look for strategic assets to build up their businesses. To recap, Sinopec surprised the markets earlier this week when it paired with ENN Energy (HKEx: 2688) to launch a $2.2 billion unsolicited bid for privately held China Gas (HKEx: 384), which operates a lucrative natural gas distribution network in China. China Gas fired back that the bid was too low, in a sharp rebuff that Sinopec and ENN clearly weren’t expecting. In the latest development, Sinopec’s chairman has said that now is “not the time” to consider a higher bid, indicating the company is unlikely to make a higher unsolicited offer in the near future. (English article)  Frankly speaking, I’m not surprised at the outcome for this first major effort at hostile M&A by a Chinese company. We need to guess a lot as clearly none of the parties are talking, but it doesn’t appear that Sinopec or ENN attempted a friendly takeover before making their hostile bid — a highly unusual occurrence in the world of M&A where the friendly route is always preferred to the hostile one. It also appears that Sinopec and ENN were completely unprepared for the rebuff they received, which again comes as a surprise as hostile offers are almost never accepted and anyone making such a bid usually has a back-up plan prepared that includes a higher bid or more detailed explanation of its actions if and when its original plan is rejected. The rapid developments in this case probably reflect a lack of experience by China’s big state-run firms in hostile M&A, and I suspect we may see Sinopec and ENN quietly enter direct negotiations with China Gas in the next few weeks, which could ultimately result in a deal more to China Gas’ liking. Regardless of the outcome in this case, Chinese firms are likely to see more stumbles in the years ahead as they try to become major global players in both friendly and hostile M&A.

Bottom line: The rapid collapse of Sinopec’s hostile offer for China Gas reflects the former’s inexperience at hostile M&A, and a friendly takeover could come instead in the next few months.

Related postings 相关文章:

◙ 2012: The Year of China Resource M&A? 2012：中国企业的资源并购年？

◙ Pricey M&A, Cheaper Gas Undermine Sinopec 溢价收购和成品油降价 中石化面对双重利空

◙ Sinopec Latest Victim of Environmental Scrutiny 中石化管道工程因环保计划不足被叫停