Inbound China M&A takes flight on consumer promise

Sun Feb 19, 2017 6:19pm EST
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By Elzio Barreto

HONG KONG (Reuters) - Overseas acquisitions by Chinese buyers are cooling after two record years as Beijing reins in capital outflows, but deals into China are on the rise, and new rules will make it easier for foreign buyers to tap China's giant consumer potential.

Inbound M&A deals have already reached $7.1 billion so far in 2017, almost double the amount in the same period last year and are well on track to beat the 2016 total of $46 billion, while outbound deals tumbled more than 40 percent to $8.4 billion, Thomson Reuters data showed.

Deals in retail and consumer staples accounted for nearly half those early transactions, far outpacing real estate and financial deals, which usually dominate inbound M&A.

Belgian investment firm Verlinvest is ahead of the trend.

It set up a $300 million venture last year with Chinese state-owned conglomerate China Resources and has already deployed more than half of the funds.

Verlinvest, which manages funds for the founding families of Anheuser-Busch InBev (ABI.BR: Quote), is investing in minority and majority stakes in leading western brands so it can push them through China Resources' distribution channels in China, said Nicholas Cator, who is responsible for the Asia business.

"We're going to be focusing on those high-growth sectors that are based on consumer trends, like health-related food and beverage products, healthcare, education, cinema or entertainment, or anything linked to kind of cultural production and content," he said.

Verlinvest's joint venture in December bought an undisclosed stake in Oatly, a Swedish maker of dairy-free products, and plans to expand it into China, and in November it bought a majority stake in Red Sun Enterprise, which owns senior care homes in Shanghai and Nanjing.   Continued...

FILE PHOTO: People queue outside of a newly opened duty free shop in Shanghai, China, August 8, 2016.  China Daily/via REUTERS/File Photo