Business News: By Julie Zhu | HONG KONG |
Chinese conglomerates, still eager to snap up assets abroad, are rushing to raise money offshore in order to get around capital outflow curbs that have made it much tougher for Chinese bidders to complete outbound mergers and acquisitions.
Acquisitive Chinese conglomerates – including Fosun International(0656.HK), WH Group(0288.HK) and China Everbright – that can use offshore assets to raise capital outside China say the curbs are working to their advantage by deterring potential rival bids from more domestically-focused Chinese companies that have fewer options for raising funds overseas.
“Some Chinese companies have missed out on overseas opportunities due to lengthy regulatory processes at home, but if you can raise U.S. dollars and invest in dollars too, you would not be shackled by regulatory and forex issues,” said Chen Shuang, CEO of China Everbright Limited (0165.HK), the Hong Kong investment arm of state-owned China Everbright Group.
Chinese bidders spent a record $105 billion on assets ranging from movie studios to football clubs in 2016 but over the past six months Beijing – in a bid to prop up the flagging yuan – has cracked down on companies taking money offshore to buy non-core assets.
This hasn’t stopped China’s conglomerates, who remain hungry for overseas purchases.
They have been leveraging a range of overseas assets, including listed subsidiaries, privately-held affiliates and insurance cash, to raise capital from equity and bond issuance, as well as loans offshore, bankers and executives at these groups said.
Chinese companies issued 93 offshore bonds worth about $60 billion from December 1st to March 2017, three times the amount raised over the same year-ago period, according to Thomson Reuters data – largely to fund deals, say bankers.
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