HONG KONG: China is set to become Asia’s leader in outbound corporate acquisitions this year, ending Japan’s two-year reign, as the country’s appetite for overseas targets expands beyond natural resources and into areas such as food and banking.
China’s biggest companies are expected to boost the volume of M&A deals next year as they seek new sources of revenue growth and more global brands to expand their reach into other markets, according to investment bankers.
So far this year, Chinese companies have launched $56.2bn of overseas M&As, led by Shuanghui International Holdings’ $7.1bn purchase of Smithfield Foods Inc. While that is below last year’s $62.1bn tally, it is far ahead of the $40.7bn of deals done by Japanese firms this year, according to Thomson Reuters data.
Energy and power still dominate China’s outbound deals in value terms, though their share of overall M&As has fallen to 44.1 percent from 52.3 percent five years ago, the data show. By contrast, the proportion of financials has risen by two-thirds to 14.4 percent.
“Chinese financial institutions are now showing greater confidence than at any time since the global financial crisis in striking outbound deals, and we expect more M&A in this space,” Colin Banfield, head of Asia-Pacific M&A at Citigroup, said.
Barclays PLC leads the league table for China’s outbound deals this year, followed by Morgan Stanley, Goldman Sachs and Citigroup, according to Thomson Reuters data.
Asia’s share of global M&As has grown to more than 20 percent from the low single-digits 10 years ago, still well below Europe and the United States. But China, hungry for overseas growth, will push that even higher.
Earlier this month, China Construction Bank Corp agreed to buy a 72 percent stake in Banco Industrial e Comercial SA for about $720m. Citigroup advised the Brazilian bank, while Morgan Stanley advised CCB.
China has reshuffled the top decks at some of its banks and regulators following the nation’s once-in-a-decade political leadership change last year.
Bank of China Ltd appointed Tian Guoli as its chairman in May, and in the same month, Bank of Communications Co Ltd named Niu Ximing as its chairman.
As the new management teams settle into their jobs, they are expected to be more aggressive in purchasing assets - and possibly other financial institutions.
There is more urgency for Chinese banks to accelerate global growth as the leadership change is poised to precipitate more financial sector reforms, further pressuring margins, bankers said.
Reuters
