China seeks to invest in European finance for Xi’s Belt and Road push

Finance


Last week, sources familiar with the matter said two of China’s most acquisitive conglomerates, HNA Group and Anbang Insurance Group, had separately considered bidding for the German insurer Allianz SE.

Neither of the two made an offer, but the talks marked a new level of ambition for China: Allianz is a German stalwart, a pillar for local pensions and a global powerhouse with 1.9 trillion euros ($2.3 trillion) of assets under management.

HNA already owns a stake of just under 10 percent in Deutsche Bank.

Bankers, lawyers and company executives say more financial deals will come, led by state behemoths such as China Life and China Everbright, as well as private firms including Legend Holdings and China Minsheng Financial.

The message from the regulators is clear — they want these companies to go out and get access to large amount of funds and expertise,” said a financial M&A adviser at a global bank, who works with Chinese regulators and companies.

“They would look very favorably at transactions that have some links to the Belt and Road program, because the country needs to boost its financial muscle,” the banker said. But Beijing “will ensure the excesses of the past couple of years do not happen again.”

The banker, who declined to be named as he was not allowed to speak to the media, said his firm was currently working on several “mid-sized to large” foreign financial takeover deals.

After a deal spree that saw Chinese conglomerates spend billions on everything from landmark property to soccer clubs in a debt-fueled M&A drive over the past two years, Beijing has sought to rein in some of the excesses.

But Belt and Road deals have been an exception in the crackdown this year — including, most recently, financial deals.

China’s outbound M&A volume targeting financials has reached nearly $9 billion as of last week this year, not far from $12 billion in all of 2016, according to Thomson Reuters data. If exceeded, it would be the second best year for such deals since at least the global financial crisis in 2008.

The share of financial transactions in overall outbound deal volume has also risen to 8.2 percent this year, higher than 5.7 percent in the same period last year, while industrial deals, typically the biggest sector for outbound M&A, fell by a third.



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