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
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 (
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. (
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. (
Taiwan’s Acer (Taipei: 2353), the former PC high-flyer that has fallen on hard times lately, is launching a new plan to revive its fortunes by aiming to reduce its bloated product line by around two-thirds, a move aimed at helping the company clean up house and recapture the innovation that made it a strong contender in the first place. Local media are quoting Acer Chairman J.T. Wang saying the company will review all of its products and weed out the many money losers over the next 3 years. (
China really needs to hire someone to advise it on its solar energy policy, as new reports that it will sharply boost its already aggressive program to build new solar power plants is just the latest in a steady string of mixed signals from Beijing amid a looming trade war with Washington. In this latest solar twist, China has reportedly boosted its target for new solar energy generation to 15 gigawatts by 2015, up from a previous target of 10 megawatts that was already considered aggressive. (
A couple of new tie-ups involving major foreign players in pharmaceuticals and computing provide an interesting glimpse at how multinationals are trying to target their China initiatives to be in sync with Beijing’s latest policy agendas. The strategy of working with a local partner isn’t all that new, but in this case what’s more interesting is the targeted approach these two new tie-ups are taking, the first aimed at taking advantage of China’s ongoing massive overhaul of its healthcare system and the second at Beijing’s push to become a leader in cloud computing. Let’s look at the pharmaceuticals deal first, which is seeing Bristol-Myers Squibb (NYSE: BMY) teaming up with local drugmaker Simcere Pharmaceutical (NYSE: SCR) to make and sell a cardiovascular compound in China. (
In what should come as a big surprise to no one, China has singled out cars imported from the US for special duties after the US took similar action against Chinese-made tires in response to an anti-dumping complaint. This kind of tit-for-tat punitive tariff is relatively common and usually doesn’t do much damage as the amount of product affected is small, but in this case it provides some sobering insight over what could happen if another looming trade war involving solar cells escalates. In this latest instance, China will slap extra duties of up to 13 percent on US-made cars from GM (NYSE: GM) and Chrysler, and will even impose smaller punitive duties on cars made in the US by German auto makers like BMW (Frankfurt: BMW) and Daimler (Frankfurt: DAI). (
When does a 31 percent dip in your share price look good? When your rivals’ share prices have fallen by even more, or at least that seems to be the thinking at real estate services firm Soufun (NYSE: SFUN), which has just announced its second dividend in the last 4 months amid a broader sell-off that has seen many US-listed China stocks tumble by even more in the last few months. Soufun’s latest plan looks even more attractive now than the first plan announced in August (
Early this year I predicted that 2011 would be a breakthrough year for China Unicom (HKEx: 762; NYSE: CHU) (
2011 could well go down as one of the most schizophrenic years for IPOs in recent memory, with the latest pulling of a mega-offering by Haitong Securities (Shanghai: 600837) symbolizing the dismal sentiment that has set in over the last 6 months after a strong start to the year. According to foreign media reports, Haitong, which is already listed in Shanghai, has decided to scrap its Hong Kong offering that would have seen it raise up to $1.7 billion due to dismal market sentiment. The decision comes after a steady string of other deals that were either scrapped or went forward with weak results. One of the biggest, a Hong Kong offering by Haitong rival CITIC Securities (HKEx: 6030; Shanghai: 600030) had to be scaled back but still went ahead despite the weak sentiment. Since then, the company’s shares have sunk about 3 percent from their IPO price in September, despite its premier status as China’s biggest brokerage. Other smaller offerings by online video site Xunlei and Shanda‘s (Nasdaq: SNDA) online literature unit Cloudary had to be were pulled as well, again due to weak investor sentiment. These smaller US companies have been hit not only by that weak broader sentiment, but also by more specific concerns about Chinese firms’ accounting practices following a series of accounting scandals earlier in the year. Companies that have gone forward with offerings this year have hardly offered any reassurance. Shares of Renren (NYSE: RENN), a leading Chinese social networking site, now trade at about a quarter of their IPO price since their May offering; while shares of video sharing site Tudou (Nasdaq: TUDO), which made its IPO in August when sentiment was already weak, have sunk by more than half from their IPO price even after the company reported a surprise third-quarter profit. The combination of confidence crisis and broader weak market sentiment is no doubt behind the huge losses for US-listed China stocks. That said, investor sentiment is notoriously cyclical, and I would expect people to rediscover the big potential of China stocks sometime next year, probably around the second quarter, at which time we should see names like Haitong and perhaps even Cloudary or Xunlei make a second try at an IPO. In the meantime, braver investors with money to spare could position themselves for some nice returns by buying shares now ahead of the next uptick.
