Bottom line: Focus Media’s first major fund raising and lofty valuation following its backdoor listing in China shows such homecomings can be lucrative, but are also very time consuming, complex and not guaranteed to succeed.
Focus Media in first cash raising since backdoor listing
Focus Media has just announced its first major cash-raising exercise since its privatization from New York and return to China through a backdoor listing, and the results look quite encouraging. The company said it plans to raise 5 billion yuan, or nearly $800 million, by issuing new shares after making the homecoming through a shell company called Hedy Holdings (Shenzhen: 002027).
But what’s really impressive is the valuation that Focus, a provider of advertising services, has gotten as it leads a group of Chinese companies that are abandoning New York listings to return home to China. According to data from 2 reputable websites, Hedy Holdings now has a market value of 150 billion yuan, or about $23 billion. If that’s correct, it would be nearly 6 times what Focus was worth when it launched its plan to privatize in 2012. Read Full Post…
Bottom line: Lenovo’s decision to tweak the Motorola name is a desperate move to revive the brand, and only postpones an inevitable write-off the company will need to make for the failed acquisition.
Lenovo tweaks Motorola name
In a move that smells of desperation, struggling smartphone maker Lenovo (HEx: 992) has decided to tweak its Motorola brand name whose sales have tanked since being acquired by the Chinese company in 2014. The move will see Lenovo retire the formal Motorola name and simply refer to the brand by its shorter and trendier Moto moniker. More precisely, the brand will become known as Moto by Lenovo.
This particular move isn’t so significant from a financial perspective, since Lenovo isn’t ready yet to ditch the iconic but faded US brand it acquired for nearly $3 billion in 2014. But the reality is that Motorola lost its trend-setting image long ago, and Lenovo’s attempts to reclaim the brand’s luminary past have been a resounding failure. Read Full Post…
Bottom line: Unigroup’s cautious approach to the potential acquisition of a small US chip maker reflects political realities that make larger purchases difficult, dealing a setback to China’s dreams of quickly building a chip-making giant.
Unigroup buys into Lattice Semiconductor
After being rebuffed several times in the US and Taiwan, China’s ambitious Tsinghua Unigroup is back in the chip acquisition headlines with word that it’s exploring a possible purchase of smaller US chip designer Lattice Semiconductor (Nasdaq: LSCC). Unlike the earlier failed deals that were either outright acquisitions or purchases of major stakes worth billions of dollars, this latest deal is quite small both in dollar terms and stake size.
That would seem to indicate that Unigroup and its affiliated sister companies, all housed at the prestigious Tsinghua University, are shifting to a more cautious approach targeting smaller companies in their global M&A strategy. We saw a similar move earlier this month, when a Shanghai-based government-backed buyer bid for Okmetic (Helsinki: OKM1V), a Finnish chip design house with a market value of about $200 million. (previous post) Read Full Post…
Bottom line: Baidu’s new reorganization is further evidence that the company plans to spin off its newer, money-losing units into separate companies, which could list on China’s OTC-style New Third Board later this year.
Baidu reorganizes
Online search leader Baidu (Nasdaq: BIDU) is in a couple of big headlines as it reportedly prepares to spin off some of its non-core businesses, led by word of a major reorganization that could help facilitate such spin-offs. A separate headline says that Baidu is also in talks for a $1 billion syndicated loan, in a move that is mostly market driven but also aims at getting fresh money to continue funding many of its loss-making newer businesses.
Baidu came under fire last year for its sluggish profit growth, as founder Robin Li insisted he would continue to invest heavily in his company’s loss-making businesses like its Nuomi group buying site and Qunar(Nasdaq: QUNR) online travel agency. Investors punished Baidu’s stock as a result, leading to reports earlier this year that Baidu was planning to spin off many of those businesses into separately listed companies. Read Full Post…
Bottom line: Jin Jiang is likely to ultimately drop its pursuit of Accor and sell its entire stake in the French hotelier, which is showing signs of growing uneasiness in an unwanted courtship by its Chinese suitor.
Jin Jiang contemplates upping its Accor stake
Leading Chinese hotelier Jin Jiang (HKEx: 2006; Shanghai: 600754) and worldwide peer Accor (Paris: AC) are becoming increasingly uncomfortable bed mates, with word that the former may want to boost its stake in the latter. This particular alliance was engineered by the state-run Jin Jiang, which early this year acquired 5.5 percent of Accor by purchasing shares of the French hotel operator in the open market. Jin Jiang later upped that stake to nearly 12 percent, though again it’s not clear if it bought the shares with the approval of Accor, operator of the upscale Novotel and Sofitel brands.
The history of this relationship, combined with overtones in the latest reports, all hint at an uneasy courtship that is taking place between these 2 companies. Jin Jiang is clearly interested in Accor’s global background and expertise, as it embarks on a recent buying spree in an attempt to build China’s first worldwide hotel company. But Accor seems far less interested in being pursued by Jin Jiang, probably because its suitor is an unfamiliar company with very little experience running a global brand. Read Full Post…
The following press releases and news reports about China companies were carried on April 14. To view a full article or story, click on the link next to the headline.
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Bottom line: Shanda’s purchase of a major stake in Legg Mason marks the start of a global investment spree that is likely to see 2-3 similar sized deals in the Chinese and global financial services sectors by the end of this year.
Chen Tianqiao kicks off Shanda global buying with Legg Mason stake
With its former online entertainment empire now firmly in the past, Shanda Group looks set to embark on the next chapter of its development as a private equity investor in the financial services sector. The first major step in that campaign is in the headlines today, with US asset manager Legg Mason (NYSE: LM) announcing that Shanda has just purchased 10 percent of the company.
The purchase looks like a small first step for Shanda onto the global stage in its new carnation. The company was formerly a Shanghai-based group founded by the financially savvy Chen Tianqiao, who was an early pioneer in China’s online game industry. But poor management and a series of unlucky developments led Shanda to lose its early lead in the space, and Chen has spent much of the last 3 years selling off his various entertainment assets. Read Full Post…
Just a day after fast-growing car services firm UCar confirmed a major new tie-up with e-commerce giant Alibaba (NYSE: BABA), we’re getting more details about the new alliance that appears to auger an end to Alibaba’s previous relationship with homegrown Uber rival Didi Kuaidi. At the same time, Alibaba has just announced its largest overseas purchase ever by paying $1 billion for a controlling stake of Southeast Asian e-commerce specialist Lazada.
These 2 news items continue a recent acceleration in M&A activity for the hyperactive Alibaba, which is quite in line with the hyperactive nature of its founder and chief pilot Jack Ma. This kind of cyclical hyperactivity has become the norm for Alibaba in recent years. It typically sees the company’s high-profile activity go into overdrive for a year or so, only to come to a sudden halt when things become overheated and problems emerge. Read Full Post…
Bottom line: Alibaba’s new tie-up with Car Inc hints at a looming divorce with Didi Kuaidi, while a major new funding for its Koubei unit foreshadows a major new push that will further heat up intense competition in take-out delivery services.
Koubei seeks big new funding
Just days after reports emerged of a massive new funding for its Ant Financial unit, e-commerce leader Alibaba (NYSE: BABA) is back in the fund-raising headlines with big plans for its Koubei take-out dining unit. At the same time, an intriguing new story about a strategic Alibaba alliance with an aggressive new player in the hired car services space hints that the company may also be contemplating a divorce with national leader Didi Kuaidi.
Both of these stories reflect the catch-up game that Alibaba is playing in two important growth areas of the Internet. Alibaba previously had a presence in both through investments in hired car service provider Kuaidi and group buying site Meituan. But both of those partners entered mega-mergers over the last 6 months with their major rivals. As a result, Alibaba has divorced itself from the current Meituan Dianping, and is looking to build up its own rival Koubei take-out dining service. (previous post) Read Full Post…
Bottom line: The naming of a technocrat as chairman of China Telecom ends speculation of an industry shake-up, and indicates China’s big 3 telcos will continue as big state-owned companies that lag their global peers.
Beijing continues old ways with new China Telecom chief
It’s been quite a few months since I last wrote about China’s 3 big telcos, so the naming of a new chairman of China Telecom (HKEx: 728; NYSE: CHA) seems like a good chance to revisit this lifeless trio that were a hot topic last year due to rumors of an industry shakeup. The naming of a new technocrat as head of the carrier implies that it’s business-as-usual at China Telecom and for the broader trio of state-run caarriers, and that a shake-up that many of us were hoping for isn’t coming.
The new chairman, Yang Jie, will assume the helm of China Telecom 4 months after his predecessor, Chang Xiaobing, abruptly stepped down last year due to a corruption probe against him. Chang himself was previously chairman of China Telecom rival China Unicom (HKEx: 763; NYSE: CHU), but switched places with China Telecom’s chief Wang Xiaochu in the middle of last year in a characteristic bureaucratic reshuffling by Beijing. Read Full Post…
Bottom line: A new report spotlighting suspicious sales by BYD shows that last year’s EV explosion in China was fueled by people seeking to pocket government subsidies, while Yingli looks set to receive a government bailout from Beijing.
Yingli set to get new government rescue
A couple of stories from China’s new energy sector, one from the car space and the other from solar panels, are shining a spotlight on the challenges companies are facing after becoming too reliant on government support. One recounts a twisted tale involving electric car maker BYD (HKEx: 1211), and shows how its boom in sales last year may have been largely due to big government rebates for buyers. The other has Beijing telling one of the nation’s biggest policy lenders to provide money for struggling solar panel maker Yingli (NYSE: YGE) before it defaults on a bond payment due next month.
Let’s begin with BYD, which has experienced a rocky road over the last few years as its dream of a future filled with new energy vehicles failed to take off. That seemed to change last year, as new energy vehicle sales suddenly exploded at the company backed by billionaire investor Warren Buffett. BYD and industry boosters said the sales explosion showed that Beijing’s years of support for the sector was finally bearing fruit. Read Full Post…
