August 12, 2016 5:30 am JST

Acquisitive China Inc. shatters foreign M&A record

New buyouts in the works could soon overshadow the $5 billion takeover of German robot manufacturer Kuka by Chinese appliance maker Midea Group.

TOKYO -- Chinese acquisitions of foreign companies are continuing at breakneck pace as businesses take advantage of their financial power to adapt to a slowing domestic market.

Announced overseas mergers and acquisitions by Chinese companies in the January-June period, including deals still being negotiated, more than doubled on the year to $122.57 billion, data from Thomson Reuters shows. This first-half figure exceeds the total for all of 2015, which was itself a record year. Full-year 2016 deals could top $200 billion.

China accounted for 20.7% of global cross-border deal value, more than any other country including Germany at 18% and the U.S. with 12%.

Chinese businesses are broadening their horizons beyond the mainstays of resources, energy and manufacturing, eyeing high-tech businesses and the medical and retail sectors. The entertainment industry is getting a look as well, reflecting China's growing consumer market. Suning Commerce Group, the country's largest electronics retailer, is buying famed Italian soccer club FC Internazionale Milano, better known as Inter Milan.

The pace has not let up so far in the second half. Conglomerate Fosun International agreed to buy India's Gland Pharma for roughly $1.26 billion. Tech company Leshi Internet Information & Technology, or LeEco, will acquire U.S. television manufacturer Vizio for $2 billion. And a Chinese consortium said Aug. 5 it will spend 740 million euros ($824 million) for soccer club AC Milan.

The upswing in overseas investment comes amid slowing growth in Chinese markets for products such as appliances. Rising labor costs have thrown a wrench into the low-price strategy previously favored by Chinese companies, spurring them to snap up businesses in developed countries to gain technology, brands and sales channels.

Appliance maker Midea Group's takeover bid for Kuka, a German manufacturer of industrial robots, stirred fears in German political and business circles that China could gain access to cutting-edge technology. The move has raised eyebrows in the U.S. as well. Since Kuka's customers include American defense giant Northrop Grumman, the Committee on Foreign Investment in the U.S. could put the brakes on the deal on national security grounds.

The committee apparently has subjected several deals to heightened scrutiny recently, including Tianjin Tianhai Investment's $6.3 billion purchase of U.S. tech company Ingram Micro, which was announced in February.

Meanwhile, some argue that hasty Chinese companies are overspending for acquisitions whose benefits remain unproven. Haier Group spent $5.6 billion for General Electric's appliance business in June, $2.3 billion more than the American company had planned to sell for.

(Nikkei)

Asia300

Suning Commerce Group Co., Ltd.

China

Market(Ticker): SHE(002024)
Sector:
Industry:
Retail Trade
Electronics/Appliance Stores
Market cap(USD): 16,570.16M
Shares: 9,310.04M
Asia300

Fosun International Ltd.

China

Market(Ticker): HKG(656)
Sector:
Industry:
Non-Energy Minerals
Steel
Market cap(USD): 13,289.16M
Shares: 8,581.81M
Asia300

Midea Group Co. Ltd.

China

Market(Ticker): SHE(000333)
Sector:
Industry:
Consumer Durables
Electronics/Appliances
Market cap(USD): 39,744.39M
Shares: 6,489.60M

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