U.S. companies skeptical of corporate China's advances

Wed Apr 27, 2016 7:07am EDT
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By Greg Roumeliotis and Mike Stone

(Reuters) - Chinese life sciences entrepreneur Wei Zhou submitted a $1.5 billion bid for U.S. gene testing company Affymetrix last month - topping a $1.3 billion agreed acquisition by Thermo Fisher Scientific Inc (TMO.N: Quote). A few days later, he got an unusual deadline.

Affymetrix's CEO Frank Witney called Zhou, a former Affymetrix executive who had partnered with Shanghai government-backed investment firm SummitView Capital on his offer. Witney gave him five days to put the full purchase price and the breakup fee that would be owed Thermo Fisher in an escrow account.

Suitors of U.S. companies don't typically face such demands. But Affymetrix's board of directors decided that, because Zhou's consortium had no significant U.S. assets, the company would have little recourse if the deal fell through.

Zhou's investment bankers responded that only the consortium's break-up fee of $100 million could be escrowed, and that would take weeks. Affymetrix decided to stick with Thermo Fisher.

The deliberations, described in regulatory filings, underscore the challenges many Chinese buyers face in convincing U.S. companies to make a deal, especially when competing against a U.S. company.

Traditionally, the biggest hurdle has been the Committee on Foreign Investment in the United States (CFIUS), a government panel that scrutinizes deals for national security threats.

But as Chinese acquisitions picked up this year, U.S. dealmakers also are paying attention to financing and regulatory risk from China.

The biggest illustration of that risk was China-based Anbang Insurance Group Co's surprise withdrawal last month of its $14 billion bid for Starwood Hotels & Resorts Worldwide Inc HOT.N, which had trumped a rival offer from Marriott International Inc (MAR.O: Quote).   Continued...

A man walks into the 'W London' hotel, owned by Starwood Hotels, in Leicester Square in central London March 4, 2014. REUTERS/Toby Melville