from MacroScope:
Is U.S. economic patriotism hurting?
Any Americans believing that their country is being bought up by the Chinese might want to pay heed to a new report from the Vale Columbia Center on Sustainable International Investment. It says that China is a minimal player in terms of foreign direct investment in the United States and that Washington should in fact be doing a lot more to get it to gear up its buying.
To start with, look at the magic number. In 2010, the last year for which numbers are available, only 0.25 percent of FDI into the Untied States came from China. Switzerland, Britain, Japan, France, Germany, Luxembourg, the Netherlands, Canada were all far bigger. In the U.S. Department of Commerce's report on the year, China, numbers were so small they were lumped into a category simply called "others".
This is not enough, the Vale Columbia report says. Given China's burgeoning economic role across the globe, America can benefit from a lot:
First, FDI provides an influx of capital into the struggling economy, increasing employment at no cost to the taxpayer. Second, jobs in foreign affiliates are typically better remunerated than similar jobs in domestically owned companies. Third, keeping the US open to foreign investment demonstrates a global example for international openness. Finally, Chinese money refused by the U.S. could alternatively be directed to competitors or even the U.S.’s enemies.
(On the latter point, its worth reading our global economic correspondent Alan Wheatley's story on China's influence in Europe)
The Vale Columbia report acknowledges that Chinese FDI is controversial - primarily because a lot of Chinese companies are state-controlled and therefore raise fears that FDI may be more strategic that profit-seeking. There is also the concern about subsidies, piracy and economic espionage.
But the gains from opening the door to Chinese outweigh the risks, the report -- entitled Economic Patriotism: Dealing with Chinese direct investment in the United States -- says, recommending a series of steps such as dumping reciprocity clauses in FDI bilateral dealings.
M & A wrap: Citi scores big with EMI deals
The music industry may have a bit of life left in it after all. At least that’s the impression one is left with this week after Citigroup scored a better-than-expected $4.1 billion from two deals that mark the end of a months-long auction to sell off the parts of 114-year-old British music company EMI Group.
Vivendi’s Universal Music Group and Sony won the auction for EMI’s recorded music and music publishing operations, trumping bids by archrivals Warner Music Group and BMG Music Publishing at the 11th hour, reports Peter Lauria, editor-in-charge of Technology, Media and Telecommunications at Reuters. Universal plans to buy EMI’s recorded-music unit for $1.9 billion, according to a source involved in the process, snagging the rights to music by artists such as Coldplay, the Beatles and Katy Perry in the deal. A consortia led by Sony is expected to buy EMI’s publishing operation for $2.2 billion.
MF Global’s liquidators are struggling to sell the Asian business as one concern because of problems unwinding trading positions, so they may now sell the various country units separately, report Reuters correspondents Rachel Armstrong and Bruce Hextall. The provisional liquidators for the business in Hong Kong said on Friday there had been a number of encouraging bids for the regional business as a whole but the exercise has proved increasingly complex and the focus is now on selling off the various Asian business units individually.
U.S. coal giant Peabody Energy extended its $5 billion bid for Australia’s Macarthur Coal by two weeks after failing to reach the 90 percent threshold for acceptances by its Friday deadline, reports Sydney-based correspondent Lincoln Feast. Peabody’s acquisition of Macarthur will give it control of the world’s top producer of pulverized coal, just at a time when demand for steel-making materials holds up in Australia’s key coal market, China.
Companies in Greater China are lining up to sell shares in initial public offerings in coming months, braving jittery markets with $11.2 billion in deals, reports Hong Kong-based Elzio Barreto. Issuers are betting the steep rebound in Hong Kong and Chinese markets in the past month might signal renewed appetite for offerings that would provide funding for expansion and takeovers.
Deals wrap: Doubts grow over BSkyB bid
The British government said it would take the closure of the Rupert Murdoch tabloid, News of the World, into consideration when deciding on the mogul’s bid to buy BSkyB.
Shares in Rupert Murdoch’s bid-target BSkyB slumped as the phone hacking scandal engulfing the media mogul’s empire pushed the controversial deal into uncharted waters .
Private equity firm, Carlyle Group, is in talks to buy Energy Capital Partners, a buyout company focused on power generation, electric transmission, midstream gas and other energy markets, the New York Times said.
A Visteon Corp hedge fund shareholder that will get two board seats soon has been pushing to break up the U.S. auto parts supplier, betting the company has more value in pieces than as a whole, people close to the situation said.
A booming IPO market and the lure of high returns kept China’s private equity sector humming in the first half , stoking fear of asset bubbles amid rising concerns over the quality of listed Chinese companies.
Deals wrap: RBC offloads U.S. assets
PNC Financial Services Group will buy Royal Bank of Canada’s U.S. retail bank operations for $3.45 billion in cash and stock, making it the fifth largest bank in the United States. The WSJ gets some early reaction to the deal.
ING said it has put its car leasing business up for sale, in a deal Dutch media reported may be worth $5.7 billion.
Japan’s industrial, healthcare and technology sectors are the main focus for the Carlyle Group, the co-head of its Japanese unit told the Reuters Rebuilding Japan Summit in Tokyo on Monday.
Rio Tinto, Xstrata, Nyrstar and Noble Group in the past week have announced plans to merge or expand output or capacity — risky bets if famed market bear Nouriel Roubini’s dire warnings about China come to pass.
The rash of accounting scandals at Chinese companies could spell defeat for investment banks in Hong Kong in their long-running battle to avoid being made liable for the prospectuses of IPOs they sponsor.
The New Yorker takes an in-depth look at the Raj Rajaratnam case.
Deals wrap: Goldman buys a Chinese life insurance policy
Goldman Sachs is betting big on the word’s largest insurance market with its purchase of a 12 percent stake in China’s Taikang Life Insurance Co Ltd. Goldman’s deal could pave the way for Taikang’s planned initial public offering next year. Credit Suisse estimates China’s life insurance market –which generated $124 billion premium income in 2009 — will grow more than 20 percent per annum for the next decade.
BP’s proposed $16 billion share swap with Rosneft received a stay of execution when an arbitration panel gave it time to try to extend its April 14 deadline for the deal. The co-owners of BP’s Russian venture TNK-BP are trying to block the deal with Rosneft arguing that it violates TNK-BP’s shareholder agreement. By not killing the deal outright, the panel has given BP time to either persuade TNK-BP to drop its case or cut them in on the deal.
U.S. securities regulators may ease constraints on share issues by private companies, making it easier for start-ups like Facebook, Twitter and Zynga to raise money, the Wall Street Journal reported.
The Wall Street Journal’s Mike Spector provides an inside look at the intense bidding that took place for the Blockbuster chain on Wednesday night. A person who was at the auction says it “was at times like a ‘cage match’.”
from MediaFile:
Tencent, De Wolfe among interested buyers for Myspace
De Wolfe and Murdoch in happier times (Photo: Reuters)
Chinese Internet holding company Tencent, Myspace founder Chris De Wolfe and Myspace's current management team are among the 20 odd names kicking the tires at the once might social network to see whether it's worth buying outright or partnering in some sort of spin-out with current owner News Corp.
Tencent has previously said it is interested in possible US acquisitions.
The names come up in Reuters' Special Report on 'How News Corp got lost in Myspace', a behind the scenes tale on how the focused Facebook beat the partying Myspace. (We have the story in a handy PDF format here)
In the story, we highlight some of the key problems Myspace faced, some well-known and some not often mentioned:
- It was built on a poor technology base which couldn't keep up with the fast-evolving Web 2.0 environment
Deals wrap: Betting big on gas
BHP Billiton struck a deal to buy shale gas reserves from Chesapeake Energy for $4.75 billion, pitting itself against oil giants and China in the battle for the fast-growing energy source in North America.
China should account for 8-9 percent of global mergers and acquisition activity this year, continuing close to its strong levels in 2009 and 2010, JPMorgan’s head of China M&A said Tuesday.
Europe is braced for a flurry of stock market listings in the next two months as firms use annual results as launching pads for share sales — and hope to complete deals before investors disappear for the Easter break.
Hedge funds are betting the current environment in Japan is ideal for strategies such as event-driven and long/short, given that many companies are trading at low valuations and funding is cheap — optimal conditions for M&As.
The possibility of any imminent mergers or significant tie-ups involving the Shanghai or Shenzhen stock exchanges looks remote given both are directly controlled by the government.
Wall Street wisdom suggests investors who turn away juicy takeover offers end up losing out. Yet some recently aborted deals haven’t turned out so badly for shareholders of the targets, reports Reuters Breakingviews.
Deals wrap: Rare air brings deal
It took the rarefied air of the Swiss Alps to bring together the chief executives of Sanofi-Aventis and Genzyme and pave the way for a $20.1 billion deal.
As the cream of the telecoms industry debates how best to make money from mobile data,Vimpelcom’s Alexander Izosimov is alone in betting his balance sheet on it in unfashionable western Europe.
Chinese oil majors are set to accelerate their overseas buying spree in unconventional oil and gas assets, with an eye on technology key to help shift China’s reliance on coal to lower-carbon fuel over the next decade.
The bond of friendship doesn’t mean much when the government comes knocking on your door, the Wall Street Journal reports.
Warren Buffett will make his first trip to India next month and it could be a precursor to some deals, reports the Economic Times.
Mark Cuban says today’s market is not a bubble, it’s a pyramid scheme, reports peHUB.
Deals wrap: GM back in the driver’s seat?
General Motors Co posted a $2 billion third-quarter profit on Wednesday, driven by an accelerating turnaround in North America as it rushes to complete an initial public offering of stock set for next week.
The quarterly profit was the largest for GM since it emerged from bankruptcy in July 2009 and provides the last piece of financial data for investors evaluating the automaker’s $13 billion IPO.
The Sanofi-Aventis hostile bid for Genzyme is likely an anomaly in the pharmaceutical M & A scene, according to Reuters’ Jessica Hall. “Barring Sanofi’s overture for Genzyme, few large-scale mergers above $20 billion are likely afterward,” writes Hall.
There have been $152.7 billion in healthcare deals so far this year, down from $203.4 billion in the same period last year, according to data from Thomson Reuters.
China should relax its protectionist policies toward foreign investment and allow British alcoholic beverage giant Diageo to pursue its $1.1 billion bid for producer Shui Jing Fang, says Reuters Breakingviews columnist Wei Gu. “Approving the deal would send a positive message about openness, which may win China friends at a time when it is under attack for its trade imbalances,” writes Gu.
Is upstart venture capital firm Andreessen Horowitz overhyped? PE Hub columnist Connie Loizos says the firm’s glowing media reviews may not yet be deserved, until Andreesen Horowitz first generates some “cash-on-cash” returns. “It’s wildly enthusiastic by even Silicon Valley standards to place them in the ‘top ranks of venture capital firms,’ as the New York Times did last week,” writes Loizos.
from Breakingviews:
China IPO frenzy returns — but not in China
China is no longer blindly in love with new stocks, as seen in this week's flop of Ningbo Port. But other markets have caught the fever. Four Chinese companies rose on average around 50 percent on their debut in New York and Hong Kong in the past week. Cash-rich global investors are hungry for China's high rates of growth. A flood of new supply may test their appetite.
The excitement over the latest crop of overseas-listed China stocks is reminiscent of recent years' booms on the Shanghai and Shenzhen markets. Children's clothing maker Boshiwa <1698.HK>, and restaurant chain Country Style Cooking , rose by 41 percent and 47 percent respectively on their debuts. On domestic markets, the story is very different. China's third-largest port operator fell 4 percent on September 28, its first day of trading.
Global investors are chasing Asian growth. Asian equity funds, excluding Japan, had their best week of inflows in more than 15 months for the week ended September 22, according to fund tracker EPFR Global. Consumer-focused stocks, like Boshiwa, are particularly hot, as Chinese politicians air their promises to rebalance the export-led economy toward consumption.
China's urbanization and rising income levels have even made old themes suddenly sexy. Country Style Cooking, which specializes in quick meals for less than $3, wants to expand from a regional chain of 100 outlets to the whole nation. McDonald's, for example, has about 1,100 outlets in China.
But high expectations are baked into these prices. Country Style traded at as much as 52 times 2009 earnings by the end of its exuberant first day. Boshiwa was at 53 times its forecast 2010 earnings. Those valuations make their mainland-traded counterparts look positively cheap.
One reason for the exuberance -- scarcity value -- may be short lived. Global investors are bracing for a record year in equity offerings, including $33 billion out of China, according to Citi. While the likes of search engine Baidu have soared, countless other former darlings of overseas-listed China stock booms now languish, unloved and forgotten. The new generation may not be much different.
