China’s corporates are gearing up in Europe for M&A bargains

Chinese firms are getting ready for discount deals in Europe, where the coronavirus pandemic has sent companies scrambling for cash to stay in business.
Bankers have recently seen a spike in requests from Chinese firms and funds for proposals on targets in Europe, said the people, who asked not to be identified because the discussions are private. Many of the potential acquirers are state-owned enterprises, they said. These preliminary talks come as listed company valuations have tumbled along with the MSCI Europe Index, which tracks the continent’s developed market performance. The index slumped 23% this year in the worst rout since the global financial crisis.
Deals led by Chinese firms, particularly those owned or backed by the state, risk setting up clashes with European governments, who have signaled their willingness to defend strategic sectors.
In Europe, industries from airlines and hoteliers to soccer leagues are seeking funding aid as the business halt brought by the pandemic leads to cash-flow issues. In anticipation of potential hostile suitors, including Chinese firms, some of the corporates in Europe are dusting off their defense strategy, the people said. Bankers have been asked to help in defending against potential takeovers, they said.
While the pandemic and global travel restrictions mean deals might not be sealed anytime soon, Chinese suitors are keen to explore as they see less competition from foreign counterparts who are busy handling the outbreak, the people said.
Any sizable overseas deal would signal a comeback of China Inc. to the global stage after Beijing cracked down on what it termed “irrational” international expansion by some privately-owned corporates such as HNA Group Co. Chinese outbound deals plunged to $11.3 billion in the first quarter, the worst since the first three months of 2013, according to data compiled by Bloomberg.
State-owned enterprises often hunt for acquisitions in industries seen as a national strategic priority for China, such as automobiles, energy, infrastructure and technology. CNIC Corp., a state-backed investment fund, is considering buying about a 10% stake in Greenko Group, one of India’s largest renewable energy companies, Bloomberg News reported recently.
Private Chinese enterprises are also starting to hunt for targets. Fosun International Ltd. last month said in a statement that the Chinese conglomerate will seek out investment opportunities around the world as the “once-in-a-century” coronavirus pandemic sparks an asset-price downturn. Shanghai Yuyuan Tourist Mart Group Co., a Fosun unit listed in Shanghai, recently announced an acquisition of a 55.4% stake in French jewelry brand Djula for 210 million yuan ($30 million). MDT/Bloomberg