As U.S. companies wait on the sidelines, their Chinese counterparts are pursuing mergers and acquisitions at a fever pitch. The monetary value of Chinese acquisitions overseas has increased 28 percent from last year, according to Thomson Reuters. By comparison, worldwide merger and acquisition volume is down 2.8 percent.
While political changes in China slowed deals in the third quarter, the pace has again picked up, according to the New York Times. In addition, China recently announced the largest takeover by Chinese entities to date, with the acquisition of American International Group’s (AIG) plane leasing business. Under the terms of the deal, a group of Chinese investors, led by New China Trust Company, will purchase 80 percent of the unit, which is valued at $5.28 billion. They will also have the option to buy an additional 9.9% percent.
If the deal receives approval from U.S. and Chinese regulators, it would give China control over the second largest aircraft leasing operation in the world. Meanwhile, AIG has indicated that the deal will allow the company to focus on its core business units as it continues to rebound from the financial crisis.
Chinese M&A activity also made headlines when Canadian regulators recently approved the acquisition of Nexen, a Canadian energy company. China National Offshore Oil Company (CNOOC) will pay over $15 billion to take over the oil producer. The deal was China’s top overseas acquisition before the AIG deal.
Despite Canada’s approval, the acquisition must still be approved by the Committee on Foreign Investment in the United States, which will determine whether the deal poses any threats to national security. Given that the Committee previously blocked CNOOC’s 2005 bid for Unocal Corp., the company has reportedly taken steps to ensure that it will not face the same level of opposition this time around.
Overall, these acquisitions highlight that Chinese investors, with the support of government backers, are actively looking for deals in the U.S. and around the world. In addition, while China continues to focus on the energy sector, it has also broadened its reach into other areas, such as service industries. Our firm has provided legal services to Chinese investors and to Chinese companies seeking to do business in this country, and we expect to see a significant increase in that work in the coming years.
If you have any questions about the recent merger and acquisitions or how they may impact your company’s operations, please contact me, Donald Scarinci, or the Scarinci Hollenbeck attorney with whom you work.