The following press releases and news reports about Chinese companies were carried on March 10. To view a full article or story, click on the link next to the headline.
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iMeigu Submits Proposal to Acquire Dangdang (NYSE: DANG) (PRNewswire)
Huawei Rolls Out Huawei Pay in Bid to Shake Up Mobile Payments Market (Chinese article)
China Smartphone Supply Chain Facing Pressure From Rising Costs – IDC (Chinese article)
Alibaba (NYSE: BABA) Set to Close $4 Bln Bank Loan – Reports (Chinese article)
Ourpalm (Shenzhen: 300315) to Buy 19 Pct of Korea’s Webzen for 1.1 Bln Yuan (English article)
Bottom line: The closure of small smartphone maker Dakele marks the latest distress signal from the sector, with one or more larger, more familiar brands likely to close shop within the next 6 months.
The inevitable has finally happened in China’s 2-year-old smartphone wars, with word that a smaller player named Dakele has officially closed shop after running out of money. It’s not completely true to call Dakele the first victim of China’s smartphone price wars, since we saw a steady stream of bankruptcies among component makers that supply the actual brands toward the end of last year.
But Dakele’s closure does mark a major milestone, since it’s the first case I’ve seen of a sizable brand going bankrupt and probably signals more closures in the year ahead. Some of the most likely candidates for such closure, or perhaps purchase by another larger player, include mid-size brands like OnePlus and Smartisan, which have failed to find an audience and are probably losing big money. Read Full Post…
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Bottom line: The US should penalize ZTE for violating trade restrictions against Iran, but should moderate the severity to acknowledge that Chinese firms are improving their adherence to global laws and standards.
ZTE assists with US probe
Two days after exploding into the headlines, US sanctions against ZTE (HKEx: 763; Shenzhen: 000063) continue to ripple through the news as the Chinese telecoms equipment maker faces major disruptions to its supply chain. Washington has determined that ZTE sold equipment from US companies to Iran in violation of export restrictions against the country at the height of an international dispute about its nuclear development program.
As a result of its finding, which comes after a 4-year investigation, all of ZTE’s US suppliers, including the likes of Microsoft (NYSE:MSFT) and Oracle (Nasdaq: ORCL), must now apply for export licenses before they can sell to ZTE. Media reports have indicated that Washington is likely to deny such license requests, as punishment to ZTE for violating the trade restrictions. Read Full Post…
Bottom line: The looming completion of buyouts for Qihoo 360 and Mindray Medical points to growing momentum for successful privatizations of other Chinese firms waiting to de-list from New York.
Qihoo, Mindray head back to China
Two of the largest in a wave of privatizations by US-listed Chinese firms have just taken big steps forward, with major new announcements from software security specialist Qihoo 360 (NYSE: QIHU) and medical device maker Mindray (NYSE: MR). One case has Qihoo announcing a formal date for a meeting where shareholders will vote on its plan to privatize the company. The other has Mindray announcing it has formally completed its own buyout plan, and has filed to have its shares de-listed from New York.
It’s quite significant that both of these plans are moving forward now, since China’s own stock markets where both Qihoo and Mindray hope to eventually re-list have been in a state of turmoil these days. That turmoil has seen the main Shanghai index tumble around 20 percent this year, and it’s quite possible that more turbulence lies ahead. Read Full Post…
The following press releases and news reports about Chinese companies were carried on March 9. To view a full article or story, click on the link next to the headline.
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ZTE (HKEx: 763) Urges Suppliers to Seek US Export Licensee: Source (English article)
Smartphone Maker Dakele Shuts Down as Backers Sever Ties (Chinese article)
ReneSola (NYSE: SOL) Announces Q4 and Full Year 2015 Results (PRNewswire)
Bottom line: Xiaomi is likely to need new funds around a year from now, at which time its valuation will stagnate or even come down up to 10 percent as its growth continues to slow.
Xiaomi’s Lei meets reporters at NPC
Struggling smartphone maker Xiaomi is making headlines today for what it’s NOT doing, namely planning to raise cash anytime soon. Xiaomi’s lack of cash raising plans are coming from talkative chief Lei Jun, responding to questions about whether his company has lost value since its last mega funding at the height of its meteoric rise about a year ago.
Most of the reports are focusing on Lei’s comments that Xiaomi has no plans for an IPO in the next 5 years, and also that his company has plenty of cash — more than 10 billion yuan ($1.5 billion) to be precise. Both remarks look aimed a deflecting speculation that Xiaomi might have to return to investors soon for more money, an exercise that would force it to put a new value on the company. Read Full Post…
Bottom line: Jin Jiang’s Accor investment reflects its global aspirations and could result in a strategic partnership, while SMG’s new Imagine Entertainment investment reflects its increasing focus on film production.
Jin Jiang boosts Accor stake
Two major overseas investments are in the headlines from the leisure and entertainment sector, with hotel operator Jin Jiang (HKEx: 2006; Shanghai: 600754) and Shanghai Media Group (SMG) making major purchases in Europe and the US, respectively. The first deal has the acquisitive Jin Jiang boosting its stake in Accor (Paris: AC) to 11.7 percent, making it the French hotel giant’s second largest shareholder. The second has SMG’s China Media Capital (CMC) unit signing on as one of several new investors in Imagine Entertainment, the Hollywood production company co-founded by director Ron Howard.
Both stories reflect China’s recent drive to form global tie-ups in the leisure and entertainment sectors, as companies try to capitalize on the nation’s booming domestic market and also a growing flood of Chinese tourists traveling overseas. Jin Jiang has been China’s most acquisitive hotel company, while CMC has also been very active in forming tie-ups and investing with big names both at home and abroad. Perhaps it’s no coincidence that both of these companies are based in my adopted hometown of Shanghai, which is also China’s commercial capital. 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…
The following press releases and news reports about Chinese companies were carried on March 8. To view a full article or story, click on the link next to the headline.
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Ant Financial Set to Raise $3.1 Bln, Valued at $50 Bln (Chinese article)
Jin Jiang (HKEx: 2006) Raises Accor Hotels (Paris: AC) Stake to 11.7 Pct (Chinese article)
Xiaomi Won’t Go Public Within 5 Years, Has 10 Bln Yuan in Cash – CEO (Chinese article)
China Media Capital Invests in Ron Howard’s Imagine Entertainment (Chinese article)
China Angered by Planned US Export Restrictions on ZTE (HKEx: 763) (English article)
Bottom line: ZTE will face major supply chain disruptions following new punitive US actions for violating UN sanctions against Iran, forcing it to lower its 2016 sales targets by up to 10-15 percent.
ZTE braces for US sanctions
Officials at telecoms equipment and smartphone maker ZTE (HKEx: 763; Shenzhen: 000063) got a rough start to the new week, after media reported the company was set to get punished by Washington for selling products to Iran in violation of earlier UN sanctions. The news quickly buzzed through the headlines, and prompted ZTE to request a halt to trading of its Hong Kong-listed shares. (HKEx announcement)
This particular case actually dates back to 2012, when reports emerged that the FBI was investigating ZTE for illegally selling US computer equipment to Iran at the height of tensions with the west related to its nuclear development program. (previous post) Crosstown rival Huawei also faced similar accusations at that time. Read Full Post…
