Bottom line: Yingli’s new bank loan will be followed by a major restructuring that will force big losses on bond and shareholders, while a new asset-backed bond program to help the broader panel sector raise money will meet with tepid reception.
Beijing throws new lifelines to Yingli, solar sector
China is throwing a couple of lifelines to its struggling solar panel sector, including a relatively large rescue package for Yingli (NYSE: YGE), the player in the most precarious position. That package will see a consortium of banks, led by the policy-driven China Development Bank, provide Yingli with 2 billion yuan ($300 million) in funds as the company tries to reorganize its financially strapped balance sheet.
Word of the rescue package comes as media are reporting separately that China is preparing a much bigger lifeline for the sector, by allowing solar panel makers to sell bonds backed by the growing number of solar farms they are self-developing. Such farms provide a steady source of income from the power they generate, and thus should theoretically be more attractive to investors than directly investing in the financially-challenged solar panel makers themselves. Read Full Post…
Bottom line: Western Digital’s planned sale of 15 percent of itself to a Chinese buyer stands a 50-50 chance of getting vetoed by Washington on national security grounds, which could throw Western Digital’s planned purchase of SanDisk into doubt.
Western Digital’s China tie-up unraveling?
Many have been writing about China’s mega purchase last year of a big stake in computer hard drive giant Western Digital (Nasdaq: WDC) as if it’s a done deal, even though the $3.8 billion tie-up has yet to formally close. Even the buyer, Tsinghua Unisplendour, appeared to believe its purchase of 15 percent of Western Digital was unlikely to attract controversy, and was already using the US company as part of plans to build up China’s first global memory chip giant.
But the tie-up could fall victim to US national security concerns, following Western Digital’s new disclosure that it’s extending a timeline for the deal to close due to scrutiny from Washington. It’s probably too early to say this particular deal will collapse, even though Western Digital was apparently caught off guard by the scrutiny it’s now receiving from the Committee on Foreign Investment in the US (CFIUS), which reviews major cross-border high-tech deals for national security risks. Read Full Post…
Bottom line: Pactera is likely to get sold and re-listed in China later this year, while New Oriental is likely to make a domestic listing worth up to $100 million for its Xun Cheng online education in a similar time frame.
Blackstone shops around Pactera
The homeward migration of overseas-listed Chinese firms is moving ahead, with word that privatized IT outsourcing firm Pactera and the online unit of education giant New Oriental (NYSE: EDU) are both potentially eyeing domestic IPOs in the upcoming Year of the Monkey. These stories represent 2 different threads from the larger story of overseas-listed Chinese companies returning home to make new IPOs.
The thread represented by Pactera has seen around 40 US-listed Chinese companies receive privatization offers over the last year from buyout groups hoping to re-list the firms in China at higher valuations. The New Oriental bid represents a second, more recent trend that has seen US-listed category leaders indicate they will keep their primary listings in New York, but then spin off some of their smaller units for separate domestic listings in China. Read Full Post…
Bottom line: Sinovac may be forced to raise its buyout offer following a chorus of complaints from investors, while Ku6’s new buyout offer is unlikely to meet with any resistance due to its small size and big premium.
Sinovac gets buyout offer
The final days of the Year of the Ram are seeing 2 more US-listed Chinese companies head for the exit door, with new privatization announcements from vaccine maker Sinovac (Nasdaq: SVA) and Internet video company Ku6 (Nasdaq: KUTV). Sinovac’s announcement instantly drew criticism from one US fund manager for being too low, and it’s quite possible we could see some law firms that specialize in securities litigation voice similar criticism.
Meantime, no one is criticizing the Ku6 offer, mostly because this is a company that ceased to be relevant long ago. I’ve followed Ku6 since it first went public as Hurray Holdings in 2005. Back then it raised $70 million in its IPO, and it was acquired 4 years later by online gaming giant Shanda. But all that seems like a distant memory now, and the new privatization bid values the company at just $51.5 million. Read Full Post…
Bottom line: Washington and Beijing risk seriously hindering global trade and M&A in high-tech products in the name of national security, and should be more transparent when blocking deals and trade over such concerns.
National security vetoes look increasingly protectionist
The national security debate was in 2 major headlines last week, as word emerged that Washington might consider blocking proposed major acquisitions of US companies by Chinese construction equipment giant Zoomlion (HKEx: 1157; Shenzhen: 000157) and memory chip maker Tsinghua Unisplendour. While neither deal has been vetoed yet, the talk comes less than a year after several Washington politicians expressed reservations that ultimately killed another deal by a Chinese company to purchase leading US memory chip maker Micron (Nasdaq: MU).
With the US entering an election year, the likelihood of more deals being killed for similar reasons could grow due to opposition from politicians seeking to curry favor from voters. The growing noise from Washington comes against a backdrop of similar moves by Beijing, which last year rolled out a new national security law that foreign technology firms said was overly invasive and discriminates against them. Read Full Post…
Bottom line: M&A and IPOs by Chinese gaming companies will remain low for the next 2-3 years due to lack of investor interest, but could pick up after that if some players start losing money and have to close or sell themselves to rivals.
Investors shun gaming companies
A new report on global gaming deals in 2015 is shining a spotlight on 2 major trends in China, namely the sector’s high degree of fragmentation and also the near-freeze in IPOs by Chinese companies last year. In fact, 3 Chinese gaming companies actually privatized from New York stock exchanges last year, accounting for more than half of the sector’s global deals last year in terms of total value.
Among the big Chinese deals, the largest saw stalwart Shanda Games finally privatize in a buyout valued at nearly $2 billion, ending a 2-year process. Another big gaming firm to privatize last year was veteran Perfect World, whose buyout was valued at $1 billion. The third was China Mobile Games, whose buyout was worth about $700 million. Read Full Post…
Bottom line: Alibaba’s shares are likely to remain under pressure through the rest of this year as it enters a new phase of slower growth and its stock faces short-term pressure from short sellers.
Investors unimpressed by Alibaba results
E-commerce leader Alibaba(NYSE: BABA) was hoping for praise and kudos when it posted quarterly results that beat market expectations, but instead is receiving a cold shoulder from Wall Street bears who are betting against the company. That’s the bottom line, as investors dumped Alibaba shares after the company reported quarterly revenue that was slightly ahead of expectations.
At the same time, other media reports say that Alibaba is on the cusp of a deal to sell its stake in leading Chinese group buying site Meituan-Dianping for around $900 million. This particular sale was reported previously, and thus isn’t huge news to investors. Still, many are probably disappointed that Alibaba is yielding this important piece of the China online-to-offline (O2O) services market to rival Tencent (HKEx: 700), which will now become Meituan-Dianping’s undisputed strategic partner. Read Full Post…
Bottom line: Wal-Mart’s discussion of plans to open 115 new China stores and several new local initiatives look like mostly PR to show its commitment to the market, following its announcement of a major global overhaul earlier this month.
Wal-Mart discusses commitment to China
Just a week after announcing a major retrenchment for its global empire, retailing giant Wal-Mart (NYSE: WMT) is saying it will continue to open new stores at a brisk pace in China. The vast and somewhat unique China market also looks set to become a testing ground for new concepts, with Wal-Mart discussing plans to open its first shopping center format and also to expand its cross-border e-commerce business in the country.
The latest developments are discussed in a local media interview with a top Wal-Mart China executive, which is probably timed to quash any potential buzz that the company is planning a similar retrenchment in China to the global plan announced earlier this month. That plan saw Wal-Mart announce it will close 269 stores this year, representing just over 2 percent of its global count of 11,600. Read Full Post…
Bottom line: Apple’s China sales are likely to enter a new period of slower growth as the Chinese domestic smartphone market stalls and a growing number of higher-end buyers flock to the surging Huawei.
Apple faces long-term China slowdown
Everyone is buzzing about Apple’s (Nasdaq: AAPL) latest quarterly results, which show that sales of its iconic iPhones may have finally peaked and be set for a longer period of slow growth or even contraction. A key piece of that equation is the China market, where the company’s growth slowed sharply in the quarter due to fierce competition from a growing field of rising domestic competitors led by the surging Huawei.
As someone living in China, I can say with relative confidence that Huawei smartphones are indeed becoming increasingly common here on the streets of Shanghai. The brand is still seen as distinctly Chinese, in contrast to the trendier but fast-fading Xiaomi that rose to prominence partly on its ability to escape the “made in China” image. Read Full Post…
Bottom line: A subdued mood at Chinese high-tech firms’ New Years parties reflects a growing realism that the days of breakneck growth may be over for many, due to stiff competition and a slowing domestic economy.
Subdued mood at Year of the Monkey parties
The Year of the Monkey is still more than a week away, but already online gaming giant NetEase (NYSE: NTES) is taking the prize for most unusual New Year’s party for including sex toys among its cache of prizes during the lottery at its annual bash. Meantime, stumbling smartphone sensation Xiaomi ushered in the New Year with an unusual dose of new realism from chief Lei Jun, who also added a bit of historical revisionism in a bid to cheer up staff at his annual party.
Theses yearly parties are a good indicator of how companies feel about their performance in the previous year, and also offer some insight into their mood going into the year ahead. A media report sums up highlights from some of this year’s biggest parties, which typically bring together hundreds and sometimes thousands of employees at a single event to celebrate the New Year as a corporate “family”. Read Full Post…
Bottom line: Coolpad’s shares are likely to come under pressure for the rest of 2016 due to stiff competition in China’s smartphone market, and it could be forced to raise more money last this year following its newly-announced rights issue plan.
Coolpad taps stakeholders for more funds
It seems like $700 million and 2 major new alliances weren’t enough to prop up financially challenged smartphone maker Coolpad (HKEx: 2369), which has just announced a new share rights offer to raise up to HK$736 million ($95 million). The deal marks the latest distress signal coming from China’s overheated smartphone sector, which has seen Coolpad and a vibrant field of other domestic brands engage in a fierce game of price wars over the last 2 years.
What’s somewhat revealing about this new capital raising plan is its relatively paltry size, and also the large discount that Coolpad had to offer to sell the new shares. Even worse, one of the main buyers of the new shares is Chinese online video giant LeTV (Shenzhen: 300104), which should have been willing to pay closer to market levels for the new shares after becoming one of Coolpad’s largest stakeholders last year. Read Full Post…
