Chinese M&A surge seen ebbing as U.S. campaign heats up

Mon Jun 6, 2016 7:19pm EDT
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By Denny Thomas

HONG KONG (Reuters) - After snapping up assets at a record pace so far this year, Chinese buyers are expected to hold back in the run-up to the U.S. presidential election in November, nervous that campaign rhetoric might invite closer regulatory scrutiny of deals.

Uncertainty about the ultimate winner could also give buyers pause, said lawyers and bankers, as the presumptive Republican nominee, Donald Trump, has regularly accused China of stealing U.S. jobs and manipulating its currency for unfair trade advantage.

"The identity, let alone the foreign policy of the incoming presidential candidate in the U.S., isn't exactly clear, and it is fair to say there is considerable uncertainty about how that will play out in the China market," said Andrew McGinty, a Shanghai-based partner at law firm Hogan Lovells International, who has advised on M&A in China for two decades.

Chinese foreign acquisitions this year have totaled $104 billion, close to the total announced last year, but there have also been a record nearly $27 billion of failed attempts, mostly in the United States, and mostly due to regulatory pushback. Figures for deals announced in March through May are already down from a peak in February.

The latest Chinese outbound deal to run into regulatory trouble is Anbang Insurance Group's proposed $1.57 billion bid for U.S. peer Fidelity & Guaranty Life (FGL.N: Quote).

The New York regulator has asked Anbang to withdraw its application after it failed to provide information requested for processing the deal.

Any deal launched for a U.S. target now is unlikely to secure all the required regulatory clearances before the November election, and most buyers will think twice before launching sensitive deals during the most intense period of campaigning, bankers say.

"That will create a certain amount of uncertainty within Chinese buyers because people want to know, 'Well, who is it going to be looking at my deals?' especially if you consider the CFIUS aspect," said McGinty, who has nearly two decades of experience in China.   Continued...

A Chinese national flag flutters at the headquarters of a commercial bank on a financial street near the headquarters of the People's Bank of China, China's central bank, in central Beijing November 24, 2014
REUTERS/Kim Kyung-Hoon