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Asia: Allure of the Chinese buyer begins to fade

Outbound M&A from China has been one of the big themes in global investment banking over the past few years, much of it driven by the need to reform China’s state-owned enterprises. But it is tricky work, subject to forces beyond an adviser’s control, and only some of it is lucrative. No wonder bankers, and many selling companies, are re-evaluating whether a Chinese buyer is unequivocally a good thing.

China Rusty Knight-600

Illustration: Peter Crowther

When rumours broke in October of a possible merger between SinoChem Group and China National Chemical Corp, it brought into focus many of the interesting and difficult issues surrounding state-owned enterprise reform in China.

If true – and neither company had confirmed it at the time of writing – the merger takes on new levels of complexity. China National Chemical Corp, better known to the world as ChemChina, has been one of the most acquisitive of all Chinese businesses in recent years, picking off overseas businesses on a roughly annual basis since it bought France’s Adisseo Group in 2006. 

Other highlights have included Israel’s Makhteshim Agan in 2011, Italy’s Pirelli in 2015 and the heavyweight of all Chinese outbound M&A, the $43 billion bid for Syngenta earlier this year, which, bankers close to the deal say, is unlikely to complete this year.

Attempting a merger of the two vast chemical groups at the same time that the largest-ever foreign acquisition by a Chinese company is still being completed would be ambitious by any standards. But domestic consolidation to create national champions and outbound acquisitions to acquire technology and international ability are both part of the same theme: China’s ambition to transform its vast but bloated state-owned sector. 

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