Mergers and Acquisitions in China - Top 10 Mergers and Acquisitions in China

By: EconomyWatch   Date: 17 July 2010

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About Mergers and Acquisitions in China

The number of mergers and acquisitions in China has been going up significantly. Conventionally, the foreign investors took entry to the Chinese market with the help of the greenfield route. Of late, the merger and acquisition path is becoming more and more popular.

Mergers and acquisitions in China offer some strategic benefits to the foreign investors, as well as the domestic investors. One of the principal goals of the mergers and acquisitions in China is to gain knowledge and market share in the Chinese market.

Over the past few years, the mergers and acquisitions market in China has experienced an exponential growth. The financial reforms and convenient rules and regulations introduced in China have contributed to this growth to a significant extent.

At the present time, China is following an open policy towards the mergers and acquisitions that are taking place in the country. A number of mergers and acquisitions laws have been enacted by the Government of the People's Republic of China to regulate the domestic and the global mergers and acquisitions that are having an impact on the enterprises in China. A number of important foreign investors are also involved in merger and acquisition of Chinese enterprises and in this process, they also have to come across certain difficulties. The difficulties are often associated with financing, due diligence, closing and taxation. Nevertheless, the Government of the People's Republic of China has taken a number of initiatives for promulgating flexible rules and regulations to eliminate those difficulties.

Top 10 Mergers and Acquisitions in China

Following are the top 10 mergers and acquisitions in China:

1) The Aluminum Group of China took over eight aluminum companies. In addition, the Aluminum Group of China acquired Shanghai Non-Ferrous Metals (Group) Company Ltd., which is a major copper firm in China.

2) Fujian Sedrin Brewery was acquired by InBev. This happened on 23rd January, 2006. InBev is the biggest beer brewery in the world and Fujian Sedrin is a prominent brewer in the southeastern region of China. After this merger, InBev has achieved the position of one of the biggest brewers in China.

3) In the month of June 2006, the Baosteel Group acquired 5 percent stake of Handan Steel. Furthermore, the Baosteel Group acquired stakes in eight steel manufacturing companies and Xinjiang Ba Yi Iron & Steel Company Ltd.

4) In the month of April, 2006 the biggest meat processor of China, Shuanghui Group was taken over by Rotary Vortex Ltd., which is a wholly-owned subsidiary company of Goldman Sachs.

5) In the month of July, 2006, the largest home appliance retailing company of China, Gome Electrical Appliances Holding Ltd. acquired its competitor China Paradise Electronics Retail Ltd., which ranked as the 3rd biggest home appliance retailing company in China.

6) For a period spanning March to November 2006, a mass reconstruction of China Worldbest Group Company Ltd. was performed by China Resources Holding Company Ltd. and ultimately it acquired 100% stake with the help of the subsidiary companies of China Worldbest Group Company Ltd. China Resources Holding Company Ltd. is one of the most prominent enterprises in the pharmaceutical and textile sector of China.

7) In the month of September 2006, Yanbian Highway Construction was taken over by Beijing Guangfa Securities. This was a backdoor listing and it never happened before. After this contract, the name of Beijing Guangfa Securities was changed to Guangfa Securities.



8) In the month of October 2006, the sulfide and organic silicone operations of French Luo Sulphadiazine Company were acquired by the China National Bluestar (Group) Corporation. This deal was inclusive of manufacturing equipments, patents, as well as sales channels. Following this acquisition, Blue Star has achieved the position of the biggest investor from China in Europe. In the month of January 2006, China National Bluestar Group carried out the acquisition of Adisseo, the second biggest producer of animal nutrition supplements in the world.

9) In the month of November 2006, 85.6% stake of Guangdong Development Bank of China was acquired by a six-organization syndicate headed by Citigroup Incorporated. The other five companies involved in this acquisition are the following:

China Guodian Corporation
China Life Insurance Group
PricewaterhouseCoopers
CITIC Trust
IBM

10) In the month of June 2006, Richard Li Tzar Kai, a Hong Kong based big business leader decided to sell off his stake in PCCW, however, this move was powerfully defended by China Netcom, which is the second largest stakeholder in that company. The schemes for stake transfers were voted against by the minority stakeholders, as well. In order to strengthen its regulatory status, China Netcom formed a joint venture with a telecommunications company in Spain and in this way, it was able to maintain 28% regulatory shareholding.

Principal Considerations in Forming a Merger and Acquisition Transaction in China

The main conditions that are taken into account while coordinating a merger and acquisition transaction in China are the following:

  • Utilization of special purpose investment vehicles
  • Location of project and accessibility to preferential advantages
    Forms of Foreign Investment in China

    In general, the mergers and acquisitions in China take place with the help of the following forms of foreign investment:

  • EJV (Equity Joint Venture)
  • Wholly Foreign-Owned Enterprise (WFOE)
  • Co-operative Joint Venture (CJV)
  • Foreign Investment Enterprises (FIEs)

    Main Government Agencies Regulating Mergers and Acquisitions in China

    Following are the main government agencies that regulate the mergers and acquisitions in China:

  • State Development and Reform Commission (SDRC)
  • Ministry of Commerce
  • State-Owned Assets Supervision and Administration Commission (SASAC)
  • China Securities Regulatory Commission (CSRC)
  • State Administration of Foreign Exchange (SAFE)


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