beyondbrics

Chinese companies are increasing their appetite for corporate acquisitions in Europe.

As Jamil Anderlini writes in today’s FT, the Rhodium Group, an economic consultancy, predicts Chinese groups will invest up to $1,000bn in overseas acquisitions over the next decade, with a big slice of this investment heading to Europe. Figures from Dealogic show  the taste for Europe is already developing rapidly – with Europe accounting for a full 30 per cent of Chinese overseas m&a in the year to date, up from just 6 per cent for the same period last year.

Rhodium argues that Chinese groups, which have historically favoured overseas energy assets, will increasingly seek to buy companies with brands, technology and distribution channels.

Beijing has started pushing state-owned enterprises to target more high-tech and established foreign companies.

In the past decade, China has mostly focused on companies in the US and Australia, as the chart below shows. But wobbly stock markets and declining valuations in Europe have also made assets there attractive. In fact, figures from Dealogic show that Europe has already become a favoured destination for Chinese investment.

Europe is China’s most targeted region this year, attracting more than $12bn via 64 deals, and accounting for nearly 30 per cent of all Chinese outbound M&A in terms of deal value, according to Dealogic. This is up from just $2.5bn via 35 deals during the same period a earlier year, accounting for only 6 per cent of total Chinese outbound M&A.

Source: Baird/Dealogic

So which Chinese companies are already investing in Europe? The list below highlights a few of the major SOEs and private companies that already have a presence in Europe, or have recently done deals there. For a detailed list of all Chinese outbound M&A deals between 2008 and mid-2011, see this report from Robert W Baird, the US  financial services company.

Lenovo buys Germany’s Medion (2011): the Chinese PC maker in June paid $831m to buy German consumer electronics company Medion, hoping to expand its share of the European market. Won Waiming, Lenovo’s CFO, said Lenovo was attracted to Medion’s “management capability” and “extremely good front-end operations”. The deal marked the first Chinese acquisition of a publicly-listed German company. It will eventually give both companies a 14 per cent market share in Germany, and a 7.5 per cent market share in Europe.

HNA acquires a 20 per cent stake in Spain’s NH Hoteles (2011): privately-owned HNA Group, with assets from airlines to logistics, earlier this year paid $620m for a 20 per cent stake in Spain’s NH Hoteles. HNA also set up a joint venture with NH Hoteles to develop hotels in China.

China National BlueStar snaps up Norway’s Elkem (2011): in one of China’s largest ever European acquisitions, China National BlueStar in January paid $2bn for Orkla’s silicon business Elkem. The deal gives BlueStar, a unit of state-owned ChemChina, access to high-grade silicon production facilities and specialist technology.

Sinochem buys stake in Netherlands-based DSM Anti-Infectives (2010): state-owned chemicals giant Sinochem last year paid $279m for a 50 per cent stake Dutch vitamin maker Royal DSM NV’s anti-infectives unit, underlining China’s attempts to build up its presence in the global biotech industry.

Geely acquires Swedish carmaker Volvo (2009): in one of China’s most high-profile overseas M&A deals to date, China’s largest privately-run automaker paid $1.8bn for Ford’s Volvo car unit in 2009. The acquisition highlighted the automaker’s eagerness to associate itself with an established foreign brand, as well as adopting Western technological standards.

Further reading:
Chinese outbound M&A – more to come? beyondbrics
China Inc: record outbound M&A, beyondbrics