Bidding wars follow certain principles, but the recent battle for US hotel operator Starwood (NYSE: HOT) between local rival Marriott (NYSE: MAR) and Chinese insurer Anbang is quickly diverging from one of the most central rules. In a move that surprised many, including myself, Anbang has suddenly upped its bid for Starwood, increasing its original offer that was already 12 percent higher than Marriott’s original and only bid dating back to last year.
In all my years of covering M&A and bidding wars, this is the first time I can recall of a company increasing its own bid that wasn’t in response to a rival counter bid. The strange move probably reflects Anbang’s worries that its original offer might get rejected by Starwood, which I previously predicted would choose Marriott as a more dependable partner despite its lower offer. Now we’ll have to wait to see if Marriott responds by raising its original offer, which is now about 15 percent lower than Anbang’s latest bid. Read Full Post…
Bottom line: Starwood will ultimately reject a rival bid for itself by Chinese insurer Anbang, though earlier suitor Marriott may have to raise its original offer in order to close a deal.
Anbang makes counter bid for Starwood
China is shaping up as spoiler in the biggest US hotel merger of all time, with word that Chinese insurance company Anbang has made a surprise counter bid for Starwood (NYSE: HOT), operator of the Sheraton and Westin brands. The bid comes as the struggling Starwood was preparing to sell itself to larger and better-run US rival Marriott (NYSE: MAR), whose original offer is about 5 percent lower than Anbang’s. The latest twist also comes just a day after media reported that Anbang was in talks for another blockbuster deal to buy Strategic Hotels & Resorts, owner of a portfolio of US luxury hotels, in a deal valued at $6.5 billion.
I previously said that Anbang appears to be a company with too much cash, and would add that it doesn’t seem to have a very strong understanding of the hotel business. Put simply, Anbang seems to be suddenly smitten with any asset containing the word “hotel”, since Strategic and Starwood are very different types of companies. Whereas Strategic is largely a property owner, Starwood earns most of its money from managing hotels under its brands in buildings owned by other companies. 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…
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.
══════════════════════════════════════════════
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: Hard Rock’s new plan for China resorts and restaurants will do well due to its focus on young, wealthy hipsters, and could also auger a broader move by second-tier global hotel brands into the market.
Hard Rock coming to China
China’s hotel sector has just crossed a sort of milestone, with word that Hard Rock, a well-known but decidedly second-tier western brand, is dipping its toe into the market. Hard Rock’s move comes more than a decade after most of the world’s top hotel operators entered China, and roughly coincides with a recent push by global names like Marriott (NYSE: MAR) and Accor (Paris: AC) into the middle- and lower ends of the market.
Hard Rock has announced plans to build 3 hotel resorts in the cities of Dalian, Shenzhen and Haikou, and additional plans to open Hard Rock restaurants that are more familiar to many consumers. (English article) Such a plan looks a bit late, but could actually be well-timed since most of these resorts won’t be complete for a few years after the market has absorbed a recent glut in new property building. Read Full Post…
Bottom line: Shanghai Disneyland’s ticket pricing and proactive efforts to stop scalpers are being well received by media and local Chinese, boding well for a broadly positive launch when the park opens in June.
Shanghai Disneyland prices tickets
It’s still 4 months until Shanghai Disneyland (NYSE: DIS) formally opens its doors to the public, but already the park operator is fixating on its entrance tickets that are almost certain to become a hot commodity when they start hitting the market next month. The announcement of pricing for Shanghai Disneyland tickets, which was quickly followed by measures the company is taking to avoid scalpers, are part of a barrage of hype that will only accelerate as the park charges towards its opening date in mid June.
I’m usually a bit cynical about this kind of thing, since companies like Disney are masters at creating news just to keep their names in the headlines ahead of a big event, even if there’s no real news to report. But in this case the opening of the Shanghai Disneyland really does seem worthy of the buzz, since the new park marks a major milestone for both China and Disney itself. Read Full Post…
The following press releases and media reports about Chinese companies were carried on January 7. To view a full article or story, click on the link next to the headline.
══════════════════════════════════════════════
Alibaba (NYSE: BABA) CEO Outlines His 2016 Expansion Strategy (English article)
Netflix (Nasdaq: NFLX) Now Live in Almost All countries, Skips China (English article)
China Huawei’s 2015 Smartphone Shipments Jump 44 Pct, Cross 100 mln (English article)
Sogou’s 2015 Revenue to Reach $600 Mln – CEO (English article)
Jin Jiang (HKEx: 2006) Reaches Initial Framework Agreement to Buy Vienna Hotels (Chinese article)
Bottom line: Shanghai’s clampdown on piracy of the Disney brand reflects the city’s desire to protect its huge investment in the soon-to-open Shanghai Disneyland, and also Disney’s growing clout in China.
Shanghai protects Disneyland investment
Disney (NYSE: DIS) pirates, beware. As the grand opening of mainland China’s first Disneyland draws near, the park’s home city of Shanghai is stepping up efforts to protect is multibillion-dollar investment by clamping down on piracy of the Disney brand. That crackdown is certainly long overdue, and has just netted 5 hotels that were illegally using the Disney name to dupe visitors into thinking they were affiliated with the US entertainment giant.
In an interesting aside to this clampdown story, the 5 properties busted in the new clampdown were owned by Shenzhen-based Vienna Hotels Group. That’s significant because in August Vienna was reportedly in talks to be acquired by Shanghai’s leading hotel group Jin Jiang (HKEx: 2006; Shanghai: 600754). (previous post) Thus this latest crackdown could signal the Jin Jiang-Vienna talks ultimately collapsed, since it’s unlikely Vienna would have been targeted in such a high-profile way if it was part of the locally well-connected Jin Jiang. Read Full Post…
Bottom line: Chinese buyers will lose out to world-class rivals in bidding for top global M&A targets over the next 5-10 years, and credit ratings for the second-tier assets they do acquire will fall after ownership changes.
Two major new deals are showing why China’s credit remains low when it comes to global M&A, hobbled by factors like lack of experience, unknown brands and a growing reality that Beijing may not provide bail outs if their business runs into trouble. The first deal comes in the high-tech chip sector, and has seen the credit rating of Singaporean heavyweight Stats ChipPac (Singapore: STAT) take a hit after being purchased by a Chinese buyer. The second deal has leading Chinese hotelier Jin Jiang (HKEx: 2006; Shanghai: 600574) being snubbed in its bid for US giant Starwood (NYSE: HOT), operator of the Sheraton and Westin Brands.
Neither of these developments comes as a big surprise, but they do reflect the very real challenges that Chinese companies will face as they try to become players on the global M&A scene. Many of these Chinese names have access to big cash from their state-run connections, though converting that to foreign currency and getting necessary government approvals is sometimes challenging. More importantly, these companies have little or no track record at running a major global company, which makes creditors wary and other more experienced suitors often look more attractive. Read Full Post…
Bottom line: The arrest of a leading private equity executive for insider trading and Jin Jiang’s new fund-raising represent the latest efforts to clean up China’s unruly stock markets and make them more attractive to international investors.
Private equity giant detained for insider trading
I don’t normally write too much about China’s domestic stock markets due to their chaotic nature, but a couple of news items are shining a spotlight on the ongoing major task of cleaning up these unruly venues as they try to become more international. The larger of the 2 stories is making big waves here in China, where the one of the nation’s best-known private equity chiefs has been detained for insider trading. The second item has recently acquisitive hotel operator Jin Jiang (HKEx: 2006; Shanghai: 600574) preparing for a major new fund raising, as it tries to clean up its own financial house in a bid to become China’s first global hotel operator.
Each of these items is quite different, though both are focused on different aspects of cleaning up a domestic stock market that often seems more like the Wild West than a place for serious investors. Share price manipulation is common practice in the market, which is reflected in the insider trading story. The Jin Jiang story reflects the murky relationships that often exist between listed companies and government entities, making it nearly impossible for serious investors to clearly understand a company’s financial health. Read Full Post…
The following press releases and media reports about Chinese companies were carried on October 31-November 2. To view a full article or story, click on the link next to the headline.
══════════════════════════════════════════════
Jin Jiang (HKEx: 2006) Prepares to Raise 4.5 Bln Yuan to Improve Capital Structure (Chinese article)
Tsinghua Unigroup to Take 25 Pct in Taiwan’s Powertech (Taipei: 6239) for $600 Mln (English article)
VMWare (NYSE: VMW), Sugon (Shanghai: 603019) Form China JV (Chinese article)
Bright Food Said to Prepare IPO of $1 Bln Manassen Foods Distribution Arm (English article)
LeTV (Shenzhen: 300104) CEO Sells 100 Mln Shares, Lends Proceeds to Company (Chinese article)
