China’s Anbang Insurance Group Co., which has twice sweetened its offer to buy Starwood Hotels & Resorts Worldwide Inc., is engaged in a high-stakes bidding war with Marriott International Inc. to acquire the owner of the upscale Sheraton, Westin and St. Regis brands.
Win or lose, the latest $14 billion bid unveiled Monday by an Anbang-led investor group makes this much clear: Chinese companies have launched an unprecedented buying spree, one far more ambitious than previous efforts focused primarily on locking up supplies of global commodities and raw materials. Now, cash-rich Chinese buyers, often backed by generous lending from state banks, are trying to diversify into everything from lodging, cranes and pesticides to semiconductors, flat-screen TVs and Hollywood studios in a quest to expand into new global markets and key technologies.
Chinese firms have announced $113 billion in overseas deals since the start of the year, led by China National Chemical Corp.’s $46 billion takeover of Syngenta AG, a worldwide player in pesticides and genetically-modified seeds. That tops the total of all deals in 2014 and is close to last year’s record $121 billion tally. The shopping spree reflects an effort by President Xi Jinping’s government to encourage Chinese companies to gain know-how and market share through foreign transactions as the country’s $10.4 trillion economy continues to decelerate. It’s a potential boon for investment bankers — and a source of worry for corporate chieftains in the U.S. and Europe who may soon face new Chinese competitors. “What we’re seeing is the coming-of-age of corporate China. It’s being driven by a deliberate strategy to invest in the needs of the growing Chinese middle class and to acquire additional expertise,” said Hernan Cristerna, the global co-head of mergers and acquisitions at JPMorgan Chase & Co. “There’s a real opportunity for China to emerge as a partner of choice all over the world, if acquirers prove themselves to be responsible, constructive owners.”
The Chinese government has been encouraging the acquisitions, either through direct involvement with government-controlled companies or increased levels of financing from state-owned banks. The nation’s cabinet has made at least a dozen official pronouncements encouraging foreign deals since the beginning of last year.
That push comes against a backdrop of slowing economic expansion in China, as the government attempts to steer the economy toward consumption and services instead of manufacturing and investment. At this month’s National People’s Congress in Beijing, Xi’s government unveiled a target for economic growth of 6.5 percent to 7 percent in 2016, which would be the slowest pace in about 25 years. Meanwhile, China’s yuan was trading at five-year lows in January, following a surprise devaluation in August last year. The currency is forecast to depreciate another 4.2 percent by the fourth quarter.
Observers of China’s outbound shopping splurge have been struck by the diversity of companies doing the buying, which extends far beyond state-backed giants and natural resources champions that have historically dominated dealmaking. The Sparkle Roll owner, for example, has never made a major acquisition outside China, and the offer for Bang & Olufsen became the subject of a confusing contretemps as shareholders realized there are two Chinese firms by that name, one of which denied any involvement in the deal.